Freeport LNG Restart, Oil &Gas Upstream Spending, and Impact of Inventories Days of Cover on Prices

MAIN TAKEAWAYS

• Bullish on US LNG exports: With Freeport LNG back online, the US is poised to become the world’s top LNG exporter in 2023, surpassing Qatar and Australia.

• Bullish on US natural gas prices, and neutral on LNG: The Return of Freeport LNG will support natural gas prices in the US while putting downward pressure on LNG prices. Increased demand, however, would stabilize prices.  

• Bullish on E&P spending: Growth in E&P capital spending in 2022 was the highest in history, exceeding expectations, but remains below 2019 levels.

• Bullish on E&P spending: Growth in E&P capital spending in 2022 was the highest in history, exceeding expectations, but remains below 2019 levels.

• Upstream investment will need to rise to “$640 billion annually by 2030” to address market needs and counterweigh expected output fall, says a report by IEF and S&P Global.

• Bearish on oil prices if days of cover continue to increase: Global oil inventories are at a comfortable level showing ample supplies for now. Data shows an inverse relationship between days of cover and oil prices in the OECD and the US.  If days of cover continue to increase, they will either prevent oil prices from rising or put downward pressure on them.

IN DETAIL

Return of Freeport LNG Plant: Potential Consequences for US and European Gas Markets