The Weekly Natural Gas Market Newsletter

July 18, 2022

Natural Gas News & Notes

For the week ending 7/15, the August NYMEX natural gas futures contract closed 98.2 cents higher at $7.016. This is the highest weekly settlement price for the prompt month contract since 6/17. The natural gas market started to fall steeply on 6/8 as a result of the temporarily closure of the Freeport LNG facility. The August contract has traded as low as $5.32 since taking over as the prompt month contract at the end of June. The contract has found some strength recently due to extremely hot weather in parts of the country that is driving electricity demand to record setting levels.

The weekly EIA storage report showed an injection of 58 BCF. This was a little bit higher than the market expectation of a 55 BCF injection. Storage inventories are now at 2,369 BCF which is 9.6% below year ago levels and 11.9% below the previous 5-year average. The early expectation for next Thursday's report is an injection of 43 BCF.

Extreme heat is blanketing many regions of the country that rely heavily on natural gas to fuel power plants. Natural gas is used to power more than 50% of all power generation in Texas. The Texas/ERCOT power grid set a record high for demand this week at over 80,000 MW. ERCOT has issued notices of potential blackouts and has asked for end-users to conserve electricity. Natural gas will continue to play a key role in trying to keep the lights on in Texas as the peak summer heating season looms. The Freeport LNG plant closure has been a blessing to the natural gas market as an additional 2 BCF/day of natural gas supply has been returned for domestic use. Most of this natural gas is being used to fuel power plants in Texas and other parts of the Southwest. The delicate balance between natural gas supply and natural gas demand has been on full display over the last few weeks. Extreme price volatility is expected to continue to be seen for the trading weeks ahead.