Rigzone Talks to Ed Morse About Natural Gas Price Volatility

In an exclusive interview with Rigzone, Ed Morse, a Senior Adviser at Hartree Partners, and previously the Global Head of Commodity Research at Citi Group, looked at the volatility of U.S. natural gas prices.

“U.S. natural gas prices are more volatile than other regional prices because of the central role played by the U.S. as the world’s largest producer and exporter of natural gas,” Morse told Rigzone.

“The fact that U.S. LNG entered the global market in a unique position, namely that the law prevents destination restrictions, and that exports are not just a function of domestic supply and pipelines, but also of weather conditions, exacerbates price volatility,” he added.

Morse told Rigzone that Egypt’s and other countries’ shortfalls have tightened global LNG prices to some extent, “as is particularly seen in European TTF tightness”. He also noted that there is a potential hurricane headed for Texas and Louisiana, “heart of U.S. LNG exports”, which he said “will make it difficult to export for an unknown amount of time, affecting the trading community and affecting prices”. 

“We have prices going up sharply one day and down sharply the next,” Morse pointed out.

“It’s the natural noise of the U.S. market and is exacerbated by changing conditions globally and locally,” he added.

When Rigzone asked Jim Krane – a Research Fellow at Rice University’s Baker Institute – why the U.S. natural gas price was dropping on Monday, Krane told Rigzone late Monday that “the falling prices are pretty speculative”.

“If Wednesday’s storm is as nasty as forecasters think, it could halt Gulf coast LNG exports. That would bottle up natural gas which would have to go into storage, potentially creating a glut,” he added.

When asked the same question on Monday, Julie M. Carey - Senior Managing Director at National Economic Research Associates Inc (NERA) – told Rigzone late yesterday that “ongoing robust natural gas supply and challenges getting necessary curtailments, in combination with a lack of demand pull or an episodic event that would elevate prices during a period with soft power sector needs, are collectively keeping a lid on prices”.

A statement posted on the National Oceanic and Atmospheric Association’s (NOAA) National Hurricane Center (NHC) website at 10pm CDT on Monday warned that “damaging and life threatening hurricane force winds are expected in portions of southern Louisiana Wednesday, where a hurricane warning is in effect”.

“Preparations to protect life and property should be complete by Tuesday night since tropical storm conditions are expected to begin within this area early Wednesday,” it added.

The statement noted that there is a danger of life threatening storm surge for portions of the upper Texas and Louisiana coastlines. It stated that residents in the warning area should follow advice, including evacuation orders, given by local officials.

“Francine is expected to bring heavy rainfall and the risk of considerable flash flooding along the coast of northeast Mexico, the far lower and far upper Texas coasts, much of Louisiana, and Mississippi into Thursday morning,” the statement warned.

“A risk of flash and urban flooding exists across portions of the mid-south from Wednesday night into Friday morning,” it added.  

A release posted on the Texas Governor’s website on Sunday revealed that Texas Governor Greg Abbott had “directed the Texas Division of Emergency Management (TDEM) to activate additional state emergency response resources ahead of potential impacts from tropical activity in the Gulf of Mexico”.

A statement posted on Louisiana Governor Jeff Landry’s X page late Monday revealed that Landry had signed a state of emergency executive order in preparation for tropical storm Francine.

To contact the author, email andreas.exarheas@rigzone.com