Expected Increase In Natural Gas Prices Over The Next Couple Of Years

Energy futures are drifting higher this morning with the prompt month RBOB contract showing the most conviction, moving higher by about 1%. The oils (heating and crude) are trailing behind but still trading in the green by about .5% to start the day.

The American Petroleum Institute published their inventory estimate yesterday afternoon, showing an across-the-board build in headline values. While an increase in gasoline and diesel stockpiles seems apt given the rash of cold weather sweeping the Southeast, the crude oil inventory build comes as a surprise. The Department of Energy’s official report is due out at 11AM Central Time this morning.

The EIA published a note today highlighting an expected increase in natural gas prices over the next couple of years due to increased demand and limited supply growth. While an increase supply is expected to come from the Permian in 2025 and Haynesville in 2026, it likely won’t keep up with the increase in demand, especially if the LNG export capacity doubles by 2028. The report is conveniently(?) timed as cooler weather setting in on the east coast may force some utility companies to switch from burning natural gas to heating oil for power generation.

CVR Energy reported a fire at their refinery in Coffeyville, KS yesterday, but it was quickly contained and has not impeded production. Group 3 ULSD basis has continued to recover after taking it’s annual polar plunge, rallying nearly 20 cents over the past 10 days.

Markets are maintaining a holding pattern this week, mulling over if the President actually intends to impose a 25% tariff on Canada and Mexico after abandoning his ‘Day 1’ plan of doing so. The goalposts have moved to February 1, for now, but April 1 might be a more realistic expectations since that’s the deadline mentioned in a memo calling for a review of the budget deficit and potential trade remedies.