Natural Gas – Week In Review
Natural gas report week, June 2, 2022.
This week’s injection of 90 Bcf was at the high end of analysts’ expectations which ranged from 71 Bcf - 92 Bcf. Comparatively, last year’s injection was 100 Bcf, as is the five-year average of net injections.
A slight increase in production did little to move the needle on the exiting storage deficit to the five-year average. However, moderating temperatures led to declining residential-commercial demand which, in turn, took the steam out of Tuesday’s price rally.
With normal to below-normal temperatures forecast for much of the country through the middle of June, near-term price volatility may be somewhat subdued. However, prices for 2024 through 2026 have been on the rise and may be a sign of what to expect for natural gas markets beyond February of next year.
Natural Gas Weekly Fundamentals
Demand- Overall demand dropped by 2.7 Bcf/d from last week, with consumption falling in all sectors. Heating-related demand led the way, declining nearly 20% from last week.
Production – Production increased 0.5 Bcf/d over last week, offsetting a slight drop in imports from Canada.
Storage Forecast – The average rate of injections into storage is 10% lower than the five-year average at this point in refill season (which traditionally runs April through October). If the rate of injections matches the five-year average of 9.0 Bcf/d through October 31, natural gas supply will total 3,308 Bcf, 337 Bcf lower than the five-year average of 3,645 Bcf.
Natural Gas Price Outlook
If you’ve been waiting for prices to come back down as a part of your strategy, now might be a good time to reassess. In a week marked by losses from spot prices to prompt month and seasonal strips, that might seem overly enthusiastic. And it may be, were it not for CY 23 and CY 24. Amid the week’s losses, this activity is the most noteworthy.
Why? Although prices for Winter ‘22-‘23 are still almost double those for CY24 and beyond, the gap between the two is slowly closing as near term prices have found resistance at the $9 mark and CY24-CY26 have slowly climbed, hinting that +$3-gas is here to stay. While declining coal supplies, nuclear closures, renewable contributions, and geopolitical factors can shift prices dramatically, it’s realistic to expect prices will eventually moderate somewhere between yesterday’s lows and today’s highs. (Of course, there’s quite a bit of room in that range.) In the near-term, a tight supply-demand balance will keep price momentum locked to weather and production, especially the closer we get to the close of injection season.
Natural Gas Market Report – June 2, 2022
July NYMEX
July settled Thursday at $8.485/Dth, down 21.1 cents from Wednesday’s close at $8.696/Dth, and down 41.0 cents over the prior week.
12 Month Strip
Settled Thursday at $7.544/Dth, down 53.8 cents from the prior week.
Seasonal Strips
The summer strip (JUL22-OCT22) settled at $8.451/Dth, down 41.3 cents from the week prior. The winter forward (NOV22-MAR23) settled Thursday at $8.184/Dth, down 31.9 cents from the week prior.
Calendar Years 2022/2023/2024
CY22 settled Thursday at $8.461/Dth, down 40.5 cents from the prior week.
CY23 settled Thursday at $5.988/Dth, up 8.6 cents from the prior week.
CY24 settled Thursday at $4.807/Dth, up 24.3 cents from the prior week.
Crude Oil
Settled Thursday at $116.87/barrel, up $6.54 from the prior week.
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