MacroVoices #428 Adam Rozencwajg: AI Demand, Energy & Precious Metals

Episode Summary

Executive Summary: Macro Voices episode 428 featured Adam Rosenswag arguing that U.S. natural gas, energy equities, and gold are at major inflection points. He sees gas and oil supply growth slowing just as LNG export demand, AI/data centers, and global underinvestment intensify demand, while gold is being supported by central-bank buying and a broader monetary regime shift.

Main Topics: U.S. Natural Gas Bull Case (Priority: 5/5): Rosenswag argues U.S. gas is extremely depressed versus global prices, supply growth has stalled across major basins, and a near-term LNG export wave could tighten the market sharply. Oil Supply Plateau and Shale Slowdown (Priority: 5/5): He believes U.S. shale oil growth has flattened, especially in the Permian, reducing the main source of marginal supply growth that has offset global declines for years. AI/Data Center Energy Demand (Priority: 4/5): The discussion links AI expansion to major incremental electricity demand, likely to be met by natural gas first and eventually by nuclear, with LNG export demand arriving even sooner. Gold and Monetary Regime Change (Priority: 5/5): Rosenswag views gold's breakout as part of a long-running monetary regime shift driven by cheap real assets, de-dollarization trends, and central-bank accumulation of bullion. Gold Equities Versus the Metal (Priority: 4/5): He favors gold miners because valuations remain depressed while the metal is strengthening, though he rejects a simple long-miner/short-gold arbitrage as too risky. Broader Market Technicals (Priority: 3/5): The post-game segment reviewed all-time highs in S&P 500 and Nasdaq, dollar weakness, oil consolidation, gold strength, copper breakout momentum, uranium, and grain basing patterns.

Key Arguments: U.S. natural gas is near historically depressed price levels and could rise dramatically because downside is limited while upside is potentially several-fold. The warm winters explain some weakness, but the real issue is that shale supply growth has largely stopped. Marcellus growth has stalled, Haynesville drilling is uneconomic at $2 gas, and Permian associated gas growth is slowing as oil output plateaus. A major LNG export buildout expected in the next nine months could add about 7 Bcf/day of demand, a near-term catalyst larger than the much-discussed AI demand theme. AI/data centers will require firm power, making natural gas, coal, or nuclear necessary; renewables alone are inadequate for this load profile. Oil markets are closer to a U.S. supply plateau than many recognize, and future price spikes may be driven by non-OPEC growth slowing rather than obvious OPEC spare-capacity stress. Gold’s rise reflects a monetary regime shift: central banks are buying physical gold while Western investors are still net sellers, supporting the price floor. Gold miners remain attractive because they are cheap relative to the metal and to broader equities, with central-bank buying of bullion not yet fully reflected in mining valuations. Nuclear power is presented as the long-term answer for efficient, low-carbon electricity, but it cannot solve the immediate energy gap due to permitting and build times. The most asymmetric current opportunities are in energy and commodity equities rather than direct commodity exposure, due to contango in gas and operating leverage in miners/producers.

Data Points: S&P 500 June futures: 5333, up 232 bps - Macro scoreboard as of May 15, 2024; breakout to all-time highs. U.S. dollar index: 104.28, down 116 bps - First breakdown below the 50-day moving average since the March bull advance began. WTI crude oil: 78.63, down 46 bps - Oil weakened amid easier geopolitics and spare OPEC capacity. Arbob gasoline: 248, down 198 bps - Gasoline futures softened alongside crude. Gold futures: 2394, up 310 bps - Gold was near the April high and showing strong momentum. Copper futures: 492, up 837 bps - Copper was testing multi-year highs. U.S. 10-year Treasury yield: 4.35%, down 15 bps - Yield broke lower after inflation data. U.S. natural gas prompt price: $2.35 - Adam described prompt U.S. gas as extremely cheap versus global markets. U.S. natural gas intraday low: $1.48 - Referenced as the all-time intraday low in February/March/April. Natural gas oil-equivalent rule of thumb: Multiply gas price by 6 - Used to compare gas pricing with oil on an energy-equivalent basis. AI-driven U.S. gas demand estimate: Up to 7 Bcf/day by 2030 - Projected gas demand from data centers/AI electricity needs. New LNG demand coming online: 7 Bcf/day - He said this amount of LNG export demand arrives in the next nine months. Total U.S. gas production: ~100 Bcf/day - Framed the AI demand estimate as roughly 7% of total U.S. supply. Central-bank gold buying vs investor selling: Central banks bought 1,000 tons; investors sold 750 tons - Over the last two years, central-bank demand offset Western liquidation. U.S. oil production: 13.1 million barrels/day - Reported in the post-game EIA inventory review. U.S. oil production growth trend in Permian: From +1.0 million bpd YoY to +0.1 million bpd YoY - Used to illustrate rapid deceleration in Permian growth during 2023. EIA crude inventory change: -2.5 million barrels - Weekly inventory report discussed in the post-game. Cushing crude inventory change: -341,000 barrels - Weekly inventory report discussed in the post-game. Gasoline inventory change: -235,000 barrels - Weekly inventory report discussed in the post-game. Distillate inventory change: -45,000 barrels - Weekly inventory report discussed in the post-game. Net petroleum products draw: -2.7 million barrels - Post-game EIA summary. Gold stock illustration: Range Resources around $35/share - Used as an example of undervalued commodity equities with leverage to gas prices. Implied SPX move to June 21 OPEX: +/-130 points - Post-game technical analysis for S&P 500. Implied QQQ move to June 21 OPEX: +/-13 points - Post-game technical analysis for Nasdaq.

Pivotal Quotes: "the area of the markets today that I think are the most certainly asymmetric and potentially most exciting for the rest of this year are the U.S. natural gas market" — Adam Rosenswag: Opening thesis on where the best opportunity lies in energy markets. "we have seven BCF a day of LNG demand coming online in the next nine months" — Adam Rosenswag: Core near-term catalyst for natural gas prices. "I think you're seeing central banks around the world now accumulating massive, massive reserves of gold" — Adam Rosenswag: Explaining why gold is supported despite weak Western investor sentiment.

Implications: Listeners should view energy and precious metals as late-cycle scarcity trades: gas and oil may tighten faster than expected, while gold and miners may benefit from central-bank demand and de-dollarization. Near-term catalysts matter more than long-term themes.