January 2022 NYMEX natural gas futures settled at $3.731 on Thursday. The energy markets are closed on 12/24 for the Christmas holiday. The contract traded in a $4.04-$3.60 range during the shortened trading week. The January contract is set to expire on 12/28. Weather updates over the weekend will be the major factor in determining where the January contract expires. Price volatility into contract expiration is expected to continue.

For the week ending 12/17, the EIA reported a withdrawal of only 55 BCF. Current storage inventories are 6.5% below year ago levels and are now 1.0% higher than the previous 5-year average. The lack of sustainable cold weather has allowed storage levels to remain relatively full as the market gets set to enter the peak winter months of January and February. While the rate of withdrawals should start to pick up in the coming weeks, storage supplies should be plentiful to meet the rest of the heating season's needs.

Global natural gas prices continue to reach record high levels. European gas prices reached a high of $60/DTH earlier this week. Prices in Asia remain strong and were last seen trading near $46/DTH. US daily feedgas supply for LNG liquefaction set a record high of 13 BCF earlier this week. With the additions of Train 6 at Sabine Pass and the start-up of the Calcasieu Pass coming online in Q1 2022, peak feedgas demand is expected to be close to 15 BCF/day. With global natural gas prices continuing to trade at a steep premium to US natural gas prices, LNG export demand should remain strong in 2022.

Despite weakness in the near-term NYMEX future contract months, longer-dated prices remain strong. With upside price risk outweighing downside price potential in deferred years, long-term hedging is recommended. Merry Christmas and Happy Holidays!