The Weekly Natural Gas Market Newsletter

July 5, 2022

Natural Gas News & Notes

For the week ending 7/1, the August NYMEX natural gas futures contract closed $.551 lower at $5.73. Since June 8 th, the front month natural gas futures contract has shed almost $3.00/DTH. The closure of the Freeport LNG facility after a fire in the morning on June 8th has dumped around 2 BCF/day of natural gas supply back into the domestic US market. US LNG exports had been averaging a record high over 13 BCF prior to the fire. Nominated gas volumes into export plants for the weekend was seen at just over 11 BCF. On Friday, the Freeport facility announced a delay to the restart of operations by an additional month due to the Federal government's decision that the facility can only restart after written notice from the government is provided. The government is now requiring additional corrective actions take place which has extended Freeport's return to service timeline.

On Thursday, the EIA reported an injection of 82 BCF into storage for the week ending 6/24. Storage inventories now stand at 2,252 BCF. This is 11.6% below last year's level and 12.5% below the previous 5- year average. Despite record demand from the power generation sector, the additional gas supply available from the Freeport outage has helped both existing demand and storage levels. While it's almost guaranteed that storage inventories for next winter heating season will be both below last year's level and below the targeted 4,000 BCF level, storage levels look poised to be much healthier than originally forecasted at the start of summer.

Natural gas prices will likely remain higher than in previous years. The Freeport outage has provided a nice reprieve from historically high prices, but the same tight fundamental market situation will present itself when the Freeport demand returns to the market. Now is an ideal time to mitigate future price risk and hedge long-term exposure.