January 2022 NYMEX natural gas futures settled at $4.132 on Friday. The front month NYMEX contract lost a stunning $1.345 on the week to reach its lowest trading level since late August. The lack of sustainable winter weather thus far, to stimulate heating demand, has been the primary driver of the price drop. The contract now finds itself in a very oversold technical condition and looks poised for a bounce higher as the natural gas market waits for colder weather to enter the picture.

For the week ending 11/26, the EIA reported a withdrawal of 59 BCF from storage. This was a slightly higher figure than the average market estimate. Storage inventories are now 9.5% below last year's level and 2.4% below the previous five-year average. With the lack of heating demand in the US, next week's report for the week ending 12/3 is forecasted to show another bearish withdrawal of only 51 BCF.

US LNG output remains strong. For the week ending 12/3, the average daily LNG feedgas demand was 11.5 BCF. This was down slightly from last week's average of 11.8 BCF but overall demand will continue to remain robust as global LNG prices remain very strong. As Asia and Europe are starting to experience colder winter weather, LNG prices trending higher. Equivalent values in Asia and Europe are $36/DTH and $30/DTH respectively.

End-users of natural gas in the US should view recent trading activity as an early Christmas present. Natural gas fundamentals support higher prices and elevated levels of price volatility over the next few years. The recent drop in value on the front end of the natural gas price curve has also pressured prices lower across the entire forward price curve. Hedging open exposure in both Cal22, Cal23 and Cal24 is strongly recommended at this time.