North America Gas Short-Term Outlook: Upcoming market inflection

July power burns are setting records. Yet markets remain unimpressed, as Henry Hub is still milling around under $1.70/mmbtu. Are market participants focusing too much on high storage levels, high LNG under-utilization, and demand loss from coronavirus, while ignoring production’s structural declines? An inflection point is around the corner. A wide contango to winter prices is showing that: Production structurally is weaker than last year and can’t act as a buffer for storage, and Demand recovery from coronavirus and higher LNG utilization rates will draw monthly storage balances into a deficit to the five-year average by December With storage looking ever more likely to draw down lower than last year’s levels by March 2021, higher prices are necessary to incentivize production in 2021.