[Editor's note: A version of this story appears in the December 2021 issue of Oil and Gas Investor magazine.]

“If there were ever a situation where it is appropriate to say ‘it’s different this time,’ this is it,” said J. R. Weston, associate analyst for midstream and NGL, Raymond James. “That is because there really are several things that are structurally different about the North American gas market this time. First, there is the huge pull of LNG exports, as well as the pipeline exports to Mexico. Those two, together, now account for about 20% of U.S. production.”

The other major difference is capital discipline. “The financial support for the upstream is much different,” Weston said. “We’ve been vocal about that. As a result, we only anticipate 1 to 3 Bcf/d of cumulative supply growth from 2020 to 2022. We used to see growth of 8 to 9 Bcf/d per year in 2018 and 2019, mostly from associated gas. Now, just about the only incremental supply growth that is responding to prices are private operators in the Haynesville.”

The net of significant demand and muted supply response is higher prices. “At present, prices are responding to the relatively low storage,” Weston said. “Because of increased exports, total days of supply will continue to drop in 2022, even as we rebuild storage. Physical markets are going to remain tight. People were aware of all these factors, but I don’t think many connected the dots.”

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