THE Energy Update

THE ENERGY UPDATE for 9-25-23

Active Week Forecasted

THE DRIVING FACTORS

**NYMEX **– NYMEX kicks off this week opening at $2.64, a high of $2.67, and a low of $2.60. Resistance today starts at $2.71 with a top end of $2.87. Support starts at $2.61 with a downside of $2.34. NYMEX is now forecasted to average $2.93 for 2023, $3.36 for 2024, $3.96 for 2025, and just and $4.04 for 2026. For the balance of 2023, NYMEX is forecasted to average $2.88 for Nov ’23 and $3.30 for Dec ’23.

BASIS – PG&E CG is inching up a few pennies so far today while SoCal CG continues its downward spiral. Get it while you can because we know it never lasts. Just like NYMEX, now through mid-Oct ’23 may be the best times to lock in strips, especially winter strips.

RIG COUNT – Two weeks ago we saw a 15-rig increase, ending a 19-month low for natgas rigs. This past week we gave back 3 rigs for a total of 118 active natgas rigs. Active oil rigs also fell by 8 rigs for a total of 507 active rigs. We are 18% down from this time last year in overall active rigs.

PRODUCTION – Last week dry natgas production =averaged 101.1Bcf/D, down 1.1Bcf from the previous week. Production is up 1.2Bcf/D from 1 year ago and up 5.5Bcf from 3 years ago.

DEMAND – Total natgas demand in the U.S = 93.7Bcf/D, down 5Bcf/D from the previous week. Demand is up 1.3Bcf/D from 1 year ago, and up 4.1Bccf from 3 years ago.

RETAIL POWER (CALIFORNIA) – Retail power prices here in California fell from the $45MWH range to the $42MWH range.

**CO (carbon offsets) and RSG (responsibly sourced gas) – **companies like Shell, Leon, Gucci, and Nestle are all questioning the current carbon offset market and the validity of some of the CO offerings currently out there. This is a great thing, in my opinion, because the last thing we need are more bogus climate/earth saving schemes.

CRUDE – **WTI Crude prices jumped over $90 last week before falling to the current price of $88. Crude is now averaging $89 for 2023, $81 for 2024, and $75 for 2025. Saudi and Russia continue their cutback of daily production by 1.3MM barrels/D. **

NUCLEAR – More countries are rethinking just how they want to increase their power supply and nuclear is currently the clear favorite. Italy has changed their tune and is now looking to being back nuclear. Even Saudi is shifting towards nuclear as plans for their first nuclear plants are in full swing.

RENEWABLES – California is pushing a bill through right now that will “encourage the installation of solar power infrastructure along California’s highways. If signed into law, Senate Bill 49 would direct state agencies to evaluate the potential for solar energy, battery storage, and transmission infrastructure alongside highways to help California meet its clean energy targets — generating 90% of the state’s power by 2035 and 100% by 2045.” Better spend just as much time building up the outdated and poorly managed electric grid here in the Golden State before slapping charging stations up and down the 5 freeway – that’s right. Here in the Golden State, we refer to our freeways as “The 5. The 10. The 405’. That’s just how we roll here in California, usually at 30MPH on the 5, the 10, and especially the 405….

**ITEMS OF INTEREST **– Supply and weather. Some “experts” think we will see a drop in daily production while other “experts” believe we will stay at the current daily production numbers through the winter. The forecasts show a warmer than normal winter for most of the US. If those forecast holds, we have less, but not nothing, to worry about. As we see every day, forecasts are often wrong because weather patterns change, even more than my wife changes her mind on which purse to take to lunch with the girls….

THE BOTTOM LINE – Winter is coming for all of us and that means more bullish volatility, leading to higher, more violent price spikes.

AS A REMINDER - Just in case you forgot…Dec ’21/Jan’22 NGI Index for PG&E CG = $6.35/$7.72. SoCal CG = $7.37/$9.84, NYMEX alone = $5.16/$4.04. Dec ’22 NGI Index for PG&E CG = $14.08/$49.52, SoCal CG = $15.11/$54.30, and NYMEX alone = $6.83/$5.21. Do we have your attention now? I thought we might. Get it on the expected downward trend over the next few weeks and enjoy the upcoming holiday season.

First of the Month Index Pricing Average for 2022 - PG&E CG = $8.298 SoCal CG = $8.380

***12 MONTH FIXED PRICES CONTINUE TO BEAT THE 2022 FIRST OF THE MONTH INDEX AVERAGES. ***

Indicative Fixed Prices as of 9/25/2023

Start Date Term PG&E CG SoCal CG

Oct ’23 1 mo. $4.75 $4.82

Oct ’23 3 mo. $6.43 $7.03

Oct ‘23 6 mo. $6.80 $7.35

Oct ’23 12 mo. $5.96 $6.41

Oct ’23 24 mo. $5.92 $6.46

Nov ’23 – Mar ‘24 $7.23 $7.85

Apr ’24 – Aug ‘25 $5.04 $5.32

**STORAGE REPORT – **The most recent forecast for storage was an injection of 64Bcf. The actual number came in at 64Bcf. We're now 410Bcf higher than this time last year and 183Bcf above the 5-year average of 3,086Bcf. At 3,269Bcf, total working gas is within the 5-year historical range. End of Injection Season level forecast falls to 3.80Tcf. We’re going to need weekly injections for the remainder of the injection season to be over 80Bcf just to get close to 3.80Tcf. Some people believe it will be closer to 3.70Tcf when it’s all said and done.

**WEATHER – **The 6-to-10-day forecast shows a major cooldown for the West region. Most of the US will enjoy normal temperatures while Texas, Great Lakes, and New England areas are forecasted to be above normal. This could be our best opportunity to lock in winter strips. The 3-month forecasts for both Oct/Nov/Dec and Dec/Jan/Feb are looking bearish.