21 April 2022
GOEHRING & ROZENCWAJG — A sudden and unexpected event is about to take place: the global natural gas crisis, now gripping large swaths of the world, is about to engulf North America as well.
Asian and European natural gas prices today stand at $30 per mcf versus $7.50 per mcf here in the United States. Given the underlying fundamentals that have now developed in US gas markets, we believe prices are about to surge and converge with international prices within the next 6 months. The convergence of US and international gas prices will come out of nowhere and take all investors by surprise.
Global natural gas markets have been in a full blown crisis since summer 2021. Gas prices reached a record breaking $35 per mmbtu last October, and by December they had surged again, this time surpassing $50 per mcf — approximately $300 per barrel in oil terms. Evidence of the global natural gas crisis appeared first in Europe early last spring as a colder than normal late winter left natural gas inventories in both Europe and Russia near record low levels. Once additional Russian supplies failed to emerge, European utilities and industrial gas consumers by mid-summer had aggressively entered global LNG markets seeking additional supplies. Consensus opinion believed that Russia withheld contracted gas over the spring and summer; however our analysis tell us that Russia honored all its previous agreed-upon supply agreements. Additional gas above contracted levels were withheld as Russia attempted to first refill its own depleted inventories. […]