associated<\/u><\/em> natgas production in North America\u2014more than 12 bcf\/d across the five big US oil basins.\u00a0 This does impact Canada and Canadian natgas stocks as the North American natgas market is quite well integrated.<\/p>\nThe market calls natgas produced from these \u201coil\u201d plays associated gas.\u00a0 And it has played havoc with North American pricing\u2014for both the producers and their shareholders.<\/p>\n
(Canada has the same thing except it\u2019s condensate (a very light oil) that carries the economics of production up here, not oil.\u00a0 Natgas often accounts for 10% or less of revenue despite being nearly 50% of production stream.)<\/p>\n
Natgas in the Permian went to negative pricing several times in the last 18 months as Permian oil production surged.\u00a0 The Permian produced so much oil, that they flared 1 billion cubic feet of associated natgas PER DAY!<\/p>\n
So when oil prices go negative, and oil production gets shut in fast and the oil rig count falls off a cliff\u2014natgas supply should go with it.<\/p>\n
(In 2018 Texas reported 8 bcf\/d of natgas production with ZERO natgas rigs\u2014that\u2019s a lot of associated natgas production!)<\/p>\n
And\u2014just in the last couple days, literally–natgas supply in the US fallen below 90 bcf\/d from a high of just over 96 bcf\/d earlier this year.<\/p>\n
Is this the turn\u2014for real? Could we be witnessing is a change in the narrative \u2013 specifically: that the elephant (forever low natgas prices) has left the room and may even be out the building.<\/p>\n
I confess I\u2019m not a believer just yet\u2014for a few reasons.\u00a0 One is the dramatic bounce-back increase in the price of oil.\u00a0 Will that really mean much oil gets shut in?\u00a0 Both Diamondback (FANG-NYSE) and Parsley Energy (PE-NYSE)<\/strong> <\/span>said on their Q1 conference calls this week that they would bring oil production back at just US$30\/b WTI.<\/p>\nAnd Plains All American (PAA-NYSE)<\/strong><\/span> noted yesterday on their Q1 call that they expect overall Permian volumes to be down 15-20% exit-to-exit this year.<\/p>\nIn other words\u2014I\u2019m just not sure US oil production will fall as much as people think.\u00a0 That means natgas production won\u2019t drop that much either.<\/p>\n
I still think natgas inventory levels fill up this year\u2014there is already more gas in storage than both last year and the last 5 year average.\u00a0<\/p>\n
And the Market is expecting that surplus to get bigger in the next three weeks. This week\u2019s natgas injection into storage (based on last week\u2019s weather) is expected to be +110Bcf; last year this week was +96Bcf on the same week.\u00a0 The following two weeks are also expected to show slightly larger increases in natgas storage builds, despite lower production.
\u00a0
And global LNG cargoes are being returned as demand has dropped everywhere on earth.\u00a0 So far LNG exports out of the US are only down about 2 bcf\/d\u2014a bit less than what production is down, so that\u2019s bullish natgas.\u00a0 But if that relief valve on US production was to be shut for a few months\u2014OUCH!\u00a0 The Elephant is BACK!
\u00a0
Once again, investors will be waiting to see what natgas pricing does\u2014based on oil pricing.\u00a0 What\u2019s good for oil is bad for natgas.<\/p><\/p>\n","protected":false},"excerpt":{"rendered":"
What’s good for oil prices is bad for natural gas prices—and vice versa. So the negative oil prices that investors saw mid-April should be good for natgas supplies (down) and natgas stocks (up!). But will that really be the case—can this rally in natgas stocks be for real? The charts of some Canadian producers have […]<\/p>\n","protected":false},"author":19,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[528],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1182740"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1182740"}],"version-history":[{"count":2,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1182740\/revisions"}],"predecessor-version":[{"id":1189216,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1182740\/revisions\/1189216"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1182740"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1182740"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1182740"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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