Each week I send you the NATGAS news that talks about the numbers of the week and a general outlook on where the markets are headed. Honestly, it's really designed to fill you in on what's already happened and a small look at what might happen soon. Usually, it'll generate questions for me and that's where the deeper dive happens into the goals of each individual end user and the options available given the current conditions.

You need to know that the tide has changed….

This week I need to talk about the continuation of a "perfect storm" that has been brewing for the last several months. These clouds have grown darker and darker and now I'm convinced that, for the next several months, we will see things we've never seen. I feel strongly that $15-$20 NATGAS is coming, and when it does, demand destruction will hit hard and send prices back to reality.

Why do I believe this?

• The War in Ukraine is rocking our markets here in the U.S. & LNG (Liquified Natural Gas) exports will increase to record volumes over in the coming months. In short, Europe is willing to pay more for U.S produced NATGAS than we are. As long as this happens, our supply will shrink until prices adjust upward for end users here in the U.S.
• The Weather: NATGAS demand has broken records for Power Generation this summer. The general electrification of the U.S. along with the heat this summer has been a game changer as this segment will pay whatever price is needed to fuel the production of electricity. Again, end users will end up paying more to compete with Power Generators for gas supply.
  
• The Storage: U.S Storage is too low. Market players are not filling up storage. In fact, they are depleting it by "kicking the can down the road" in hopes that conditions change. This is a very dangerous play for sure.
  
• The Production: NATGAS Production can't keep up with demand. Daily production has been slightly higher than daily demand. If storage doesn't get into high gear on filling up, and we have any kind of winter, this will be a major issue.
  
• The Basis: This one is the most telling predictor of future dark clouds. The physical purchase price of NATGAS supply has disconnected from the financial NYMEX markets. NYMEX based gas is no longer sold in Georgia by NATGAS producers. This one is new and requires much more discussion than this newsletter.

The only fix to the problem is price and/or demand destruction. Call me if you want to take a deeper dive. For now, consider adjusting your budgets upward…

Sincerely,

Mike Davis

President,/CEO FireSide Natural Gas

770-354-4234