The Weekly Natural Gas Market Newsletter

June 27, 2022

Natural Gas News & Notes

For the week ending 6/24, the July NYMEX natural gas futures contract settled $1.244 lower at $6.220/DTH. The July contract has sold off a whopping $3.44 since posting an intra-day price high of $9.664 on 6/8. The reported fire at the Freeport LNG facility in the afternoon of 6/8 prompted the price turnaround. The subsequent announcement that the Freeport facility would be closed until the fall time period increased selling pressure on the July contract that has since spilled over to the rest of the natural gas forward curve as well. With the Freeport facility out of commission for at least 90 days, an additional 2 BCF/day of natural gas supply is now available for domestic use which helps improve a fundamentally tight market.

The EIA reported a storage injection of 74 BCF on this week's storage report. This was a larger injection than most market analysts had anticipated. Storage levels now stand at 2,169 BCF which is 12.3% below year ago levels and 13.2% below the previous 5-year average. The gas supply volume now available to the market from the Freeport outage is seen as helping improve storage for the week ending 6/17. The early estimate for next week's storage report is an injection of 69 BCF.

The collapse in prices has caused the July NYMEX futures contract to be pushed into an oversold technical condition. With the expiration of the contract occurring on Tuesday, it's possible that the contract could see a corrective price move that supports a higher expiration price. The market will continue to watch the impacts that the Freeport outage has on the market's supply and demand balance. One thing to note is that with very low working levels of coal stocks and with the price of coal soaring since Russia invaded Ukraine, fuel switching at power plants will be less than in years past. Hotter summer weather could offset Freeport's shutdown. Taking advantage of recent price weakness to add long-term natural gas hedges is recommended.