The Monthly Natural Gas Market Newsletter - December 2021
FireSide Natural Gas Monthly Report - December 2021
Natural Gas Prices
NYMEX January 2022
NYMEX January 2022 natural gas
futures are trading at their lowest
level since August. The lack of any
sustainable winter weather thus far,
which has reduced heating demand
for natural gas, has been the primary
driver of the recent drop in prices.
January futures hit a high of $6.47 in
October but have shed almost
$3.00/DTH in value over the last six
weeks. The contract currently has
found near-term support around the
$3.65-$3.70 range. This is a 100%
retracement in prices from early fall.
Technically, the January contract
looks technically "oversold" and
could see a bounce in prices.
Weather outlooks for the remainder
of December will ultimately
determine if any bounce in pricing is
sustainable.
NYMEX FORWARD CURVES
NYMEX forward natural gas prices
remain in a condition of
backwardation but the price spreads
between the forward years have
diminished greatly over the last few
weeks. With the lack of any
sustained winter weather thus far,
cal22 prices are trading at their lowest
levels since Mid-August. Cal22
prices are now only 35 cents higher
than cal23 prices and 55 cents higher
than cal24 prices. At their peak,
cal22 prices traded at over
$1.00/DTH to both cal23 and cal24
prices. While 2022 prices have come
crashing down, the deferred years of
2023 and 2024 have remain mostly
flat and present good entry levels for
customers looking to mitigate longer-term price risk.
Natural Gas Supply - Daily US Natural Gas Production
Daily dry natural gas production averaged 95.9 BCF/day in November. This compares to 94
BCF/day in October and 91.1 BCF/day in November 2020. Daily production increases in the
Permian Eagle Ford and Haynesville shale areas have been the primary driver of growth. New
pipeline projects from the Whistler Pipeline, Acadian Pipeline expansion project and Cameroon
Pipeline expansion project has added almost 3.5 BCF/day of new takeaway capacity form these
shale areas. All the added pipeline capacity is intended to fuel either LNG growth along the Gulf
Coast or exports into Mexico. The heavily constrained Northeast market area of the US is seeing
some relief as the addition of the two new projects, the 261 Upgrade project and the Westbrook
Xpress project, have recently been implemented and put into service. An additional 100 MMcf/day
will be supplied to areas of the Northeast this winter. While growth is being seen for natural gas
supply as a result of both higher prices and increased demand, most of the growth is limited
geographically to support the US' push into being the world's largest exporter of natural gas.
Domestic gas demand is increasing in many different facets but the lack of infrastructure to take
gas supplies to market will continue to be a hinderance in balancing the supply vs demand
equation.
Liquified Natural Gas - Global Natural Gas Pricing
Global LNG prices in Asia and Europe have seen a sharp uptick in prices over the
last few weeks as both winter weather and concerns about gas supplies from
Russia dominate the market news. Unlike the slow start to winter weather in the
US, Europe and Asia have started to feel the winter chill. With less than stellar
flows of gas supply seen from Russia, European gas prices have reached a new
all-time high of almost $41/DTH. European prices now are trading at a price
premium to Asia prices by almost $5/DTH. It's expected that prices in both Asia
and Europe could significantly worsen as the winter progresses. US LNG feedgas
demand continues to be strong with daily levels in December averaging 11.6
BCF/day thus far. With capacity additions seen at Sabine Pass and with the startup of the new Calcasieu Pass LNG export facility slated for early 2022, the US is
poised to take over as the world's top LNG export country surpassing both
Australia and Qatar. It's expected that peak LNG feedgas demand will be as high
as almost 14 BCF by the end of 2022. The new Calcasieu Pass plant is slated to
bring on 18 liquification trains equivalent to 1.8 BCF/day of new feedgas demand.
Sabine Pass' Train 6 will add another .8 BCF/day of capacity. With global LNG
prices expected to remain strong in comparison to US prices, daily output will
remain robust unless unforeseen mechanical issues arise at any of the US' export
plants. More LNG growth is expected in the coming years as several new US
based LNG export plants look to achieve Final Investment Decision (FID) in 2022.
Natural Gas Storage Analysis
Natural gas storage helps "balance" the US natural gas market. The highest level of gas ever recorded in storage was back
on 11/11/2016 at 4.047 TCF. The US market now considers 4.0 TCF as the new "normal" for adequate levels of gas
storage entering the winter heating season. Inventory levels reached 3.958 TCF last November. Storage exited the
2020/2021 heating season at 1.750 TCF. Current storage levels are at 3.417 TCF as the 2021/2022 heating season starts
to crank up. Inventory levels are currently 8.7% below year-ago levels and 1.8% below the previous 5-year average. In
November, storage inventories declined by 47 BCF during the month. This compares to 20 BCF that was withdrawn in
November 2020. Storage levels look to be adequate to meet this seasons heating demand. With a warm start to
December, traders are cautiously optimistic that end of season storage levels will look better than anticipated back in the fall.
Estimates for end of season inventories levels current are 1.5 TCF. This improves the storage outlook for next injection
season with current expectations looking for 3.4 TCF to enter heating season 2022/2023.
https://www.cnbc.com/2021/12/15/new-york-city-is-banning-natural-gas-hookups-for-newbuildings.html
https://www.eia.gov/todayinenergy/detail.php?id=50678
https://www.nytimes.com/2021/12/15/business/europe-natural-gas-prices.html
