In short: His energy leading indicator: the January contract at $3.80/MMBtu, the lowest since end-2021 (vs a ~$9 monthly peak in 2022) — "that led the way down after 2022 is leading the way down, telling you where energy prices are going." Hedge funds are short and it "is supposed to bounce," but hasn't; the gap to heating oil is "just a shocker."
Natural gas heats homes, generates electricity and is the main input for fertilizer. The US contract for January delivery — normally the priciest winter month — is only $3.80, the lowest since just before Russia invaded Ukraine and far below the ~$9 peak of 2022.
He watches it as the "tell" for all energy: it led energy prices down after 2022, and it is falling again while oil and heating oil are sky-high. To him that gap says oil is the outlier, and energy prices broadly are headed lower.
16:56It's the grease of the global economy. Now, this US, and you look at the rest of the world, particularly in Europe, in Asia, it's a big problem. Most notably natural gas, but that's why I want to tilt over, is your signal where things are going. US natural gas, the January contract, that's the apex of the bell curve, right now as we speak it's $3.80 per MMBtu. That's the lowest since the end of 2021, right before Russia invaded Ukraine. So that number one measure of heat, electricity, fertilizer that led the way down after 2022 is leading the way down, telling you where
In short: "All the LNG coming from Qatar has been disrupted, so the LNG gas market is very very tight." US supply has held up only because of the Permian "gas burp" — an aging-field artifact — "and that's the sign of a field that's getting older… this kind of last gasp of gas." Everywhere else US gas "has been quite weak."
LNG is natural gas chilled into a liquid so it can be shipped. Qatar is one of the world's biggest exporters and its cargoes sail through the Strait of Hormuz — so the same blockage that trapped the oil has made the global gas market "very very tight." That matters beyond heating and power: ammonia and urea fertilizer are literally manufactured out of natural gas, so expensive gas means expensive food inputs.
The subtler half is about American supply. US gas production has held up better than G&R expected, and Rozencwajg says they now understand why — and it isn't healthy. In the Permian basin, gas is dissolved in the oil like fizz in a can of soda. As the wells age and reservoir pressure drops, the gas "whooshes" out ahead of the liquid. So today's steady US gas output is partly a symptom of ageing oil fields, not of new drilling — "this kind of last gasp of gas." He expects it to fade.
32:10That's a little bit of a swan song in that field, right? And so we've been calling it a gas burp. We've been calling it all different kinds of things. We didn't have that modeled properly a couple years ago. It's resulted in Permian gas production in general staying more robust. It's been one of the reasons why US gas production, dry gas and wet gas, has actually been able to hang in there better than we would have expected.
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