Just a Flesh Wound
Look out below
BLACK KNIGHT: Oh, had enough, eh?
ARTHUR: Look, you stupid bastard. You've got no arms left.
BLACK KNIGHT: Yes, I have.
BLACK KNIGHT: Just a flesh wound.
Natural gas bulls. Are they the black knights of the energy complex? Whether getting carried out by John Arnold or blown up by spring calendar spreads in the widow maker, natural gas traders know a thing or two about flesh wounds.
But all-time record price drops so quickly after such a bull run in 2022?
Russia is using energy as a weapon, withholding natural gas from Ukraine's European allies for political and economic benefit. But Mother Nature had a surprise in store for Comrade Putin leading to ample gas storage. Almost nobody saw this plot coming.
Whether geopolitics and weather will change the current doom in natty land remains to be seen, but the recent carnage in natural gas has left bulls with few legs to lean on.
Just went it looked like natural gas prices were turning structurally higher, the rug got pulled.
When comparing average monthly prices, January 2023 - down 40% - was the worst single month in the EIA data set.
Not to be outdone, the 3-month return is the worst on record.
The steepness of the price collapse is really unlike anything since 2008/2009.
There are significant geopolitical and economic impacts from global natural gas prices plummeting. As quickly as the market turned south, however, it can potentially resume its upward march again, but that appears unlikely today. The U.S. appears export capacity constrained into 2024 and 2025. Gas-on-gas competition can often result in near-zero prices.
This may end up more than a flesh wound.