(by Paul Vivian and Rick Preckel, www.prestonpipe.com) Market Monitor – Given current natural gas prices – which appear to include about a $2/mmbtu uncertainty premium, the Freeport LNG incident, and the issues surrounding the EU attempting to wean itself off of Russian gas, an analysis was in order. To support the discussion, please note the chart above. In the chart, demand has been smoothed by additing a trend line and it has been growing slowly over this period. Supply, which is production + imports – exports, has remained relatively flat. The price, which shifted upwards in 4Q2020 is represented by a red dotted line. Natural gas had been cheap prior to 2020 but the production dip (circled on the chart) as a result of lower drilling levels after the pandemic followed by the production dip in early 2021 as a result of the February freeze, moved prices to a new paradigm. Lower associated gas production and the missed production related to the freeze re-balanced the supply/demand equation to support higher prices. As we entered the ‘21/’22 heating season, gas in storage was at about 93% of the prior 5 year average so spot prices spiked once again. The Russia/Ukraine war appears to have added about $2/mmbtu to the price. As we look ahead, we expect more LNG export capacity which will require more gas supply. The Matterhorn pipeline out of the Permian basin recently had a positive FID and we believe there will be more to come. The question is, can they get built? Import Supply – The April import total was 84,185 tons which was 21,000 tons more than the license tally from last month. May import licenses show a slight increase in volume with 91,841 tons. The June linear forecast, with 9 of 22 days summed, is up at 101,229 tons. Keep in mind this is a linear forecast, the month could be front loaded. The top import item for the month of April 2022 was Carbon ERW, over 4 ½” OD not over 16” OD, at 33,784 tons. The price was $1,472/ton which is down $70/ton. Also the top item of the year so far now selling at the average price of the year.
Preston Pipe Report – June 2022
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