Smartest Insight | Issue 99

Our weekly company round-up covers the key market and industry news in one place, so you don’t have to look any further to stay ahead.

November 23, 2022

 

Market Update:

There was a bullish start to the Thanksgiving week, +$0.47 on the potential rail strike headlines. SMART, the largest union in the collation representing over 30k workers which is over 30% of the coalition, rejected the current proposal with disagreements on paid sick leave still being negotiated. Cool off periods are currently being extended to Dec 9th. It is important to note that there was a rail strike back in 1992 but it was short-lived due to federal government intervention. The previous agreement was negotiated with the current administration so federal intervention would be likely in the event of an actual strike. A major disruption in rail transportation could lead to coal supply disruptions and thus bullish for natural gas prices. The back half of the forecast also came in colder but remains very volatile despite the pending Thanksgiving warm up. For European gas, weather runs are converging, pointing to cooler and less windy weather across Europe. Gazprom PJSC on Tuesday threatened to reduce the natural gas it supplies for transit through Ukraine, one of the last remaining routes carrying Russian pipeline exports to Europe . That news combined with the pending cooler weather sent front month European gas prices up 10% yesterday.

 

3 year view of the calendar strip price

 

FERC Approves Commonwealth LNG

On November 17, 2002, the Federal Energy Regulatory Commission (“FERC”) approved the LNG export application for Commonwealth LNG, a 1.1 BCf/d terminal near Cameron Louisiana. The U.S. has 8 operating LNG export projects that have the capacity to export nearly 14 BCf/day of natural gas. An additional 3 projects, totaling 5.7 BCf/day are under construction and will likely be completed between 2023 and 2025, increasing the U.S. export capacity to more than 20 BCf/d. An additional 12 projects, including Commonwealth, representing 20 BCf/d are permitted and in various stages of development.

FREEPORT LNG STATUS

On November 16, 2022, the Pipeline and Hazardous Materials Safety Administration (“PHMSA”) released a consultant’s report that largely blamed the June 8 explosion and fire on inadequate operating procedures, human error and fatigue. PHMSA said it accepted the redacted report but would later make its own determination on what to exclude. Neither the report, nor Freeport, has indicated an estimated return date for the LNG export facility. Freeport’s return date will have a material impact on the natural gas and power markets given it exports 2.1 BCf/d when fully operational.

Rail Strike Could Again Threaten Coal Supplies

Back in September 2022, the Biden Administration helped to negotiate an agreement between U.S. railroad owners and labor unions. Twelve labor unions must ratify that agreement. As of November 18, seven unions have voted in favor of the agreement and three others have voted it down. Sticking Points are reported to be wages, health care premiums and paid sick leave. If the parties are unable to reach a deal, Congress can intervene to avoid a strike, which could start in early December 2022. A railroad strike would be a major jolt to the U.S. economy. From an energy standpoint, a strike would interrupt the supply chain for coal deliveries to power plants, which would be bullish on natural gas, power and oil prices.