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The Weekly Natural Gas Market Newsletter January 10, 2022

January 2022 NYMEX natural gas futures expired at $4.024. The contract had hit a high of $6.67 and a low of $3.60 over the last 3 months. The lack of sustainable cold weather helped pressure the contract lower over the last few weeks. The February 2022 contract now takes over as the prompt month contract and closed the week up 10 cents at $3.73.

For the week ending 12/24, the EIA reported a withdrawal of 136 BCF. Storage inventories are now at 3,226 BCF which is 7.2% below year-ago levels and .6% above the previous 5-year average. With the peak winter withdrawal months of Jan and Feb approaching, weekly storage withdrawals should start to trend higher. Storage levels will be adequate to meet demand for the remainder of the heating season thanks to a very warm Nov and Dec.

Global natural gas prices remain very strong but prices in both Europe and Asia came crashing down before the holiday season set in. European prices dropped from $60/DTH before Christmas to $23/DTH before the start of the New Year. Asian prices dropped from $50/DTH to $34/DTH during this same time frame. A combination of increased output from Russia to Europe, warmer weather and the arrival of a "flotilla" of LNG supply from the US triggered the collapse in prices in Europe.

As the markets turns the page on 2021 and heads into 2022, there will be plenty of areas to monitor to determine future natural gas price direction. Demand for natural gas is expected to be at a record level high level in 2022. Domestic natural gas production is expected to also increase but not at the same growth rate as demand. The stage for the continuation of extreme price volatility that the market saw in 2021 is set to repeat in 2022. With longer-dated natural gas prices in deferred years still providing good value at this time, taking a long-term approach to hedging future natural gas price exposure is advised.