The Weekly Natural Gas Market Newsletter

April 4, 2022

Natural Gas News & Notes

For the week ending 4/1, the now prompt May 2022 NYMEX natural gas futures contract settled 10.9 cents higher at $5.72. The April 2022 contract expired at $5.336. Since taking over as the prompt month contract back at the end of February, the April contract gained 76.3 cents or almost 17%. May natural gas futures are trading at the highest level for a prompt month contract since the fall of 2021.

For the week ending 3/25, the EIA reported an injection of 26 BCF. This was expected based on the mild weather seen for that reporting week. However, some colder weather this week will likely produce a small withdrawal from storage on next week's report. Current storage inventory levels are 19.7% below year ago levels and 14.7% below the previous 5-year average. Storage will look to officially exit the heating season with stocks near 1.4 TCF. To reach an "adequate" level of gas in storage for the 2022/2023 winter heating season, weekly injection rates will have to be extremely strong over the course of the next 7 months.

With natural gas storage levels well below normal, refilling storage was already going to be tough to do. Now, with coal prices soaring due to the war in Ukraine, what once looked like the "marginal fuel for power producers in the US doesn't look so economical anymore. Natural gas will play a bigger role in power generation this summer. With the expected increase in gas going towards power generation, that Is less gas that will make it into storage. With LNG exports remaining extremely strong as more cargos are being sent to Europe to help prevent gas supply shortfalls from Russia, demand for natural gas could be at a record high this summer. Based on this bullish scenario, natural gas prices for both summer and winter 2022/2023 still have plenty of room to trade higher from existing levels. Price risk mitigation should be extremely important for all end-users.