The Weekly Natural Gas Market Newsletter

March 28, 2022

Natural Gas News & Notes

For the week ending 3/25, the April NYMEX natural gas futures contract settled 70.8 cents higher at $5.571. A combination of both technical buying and fundamental support propelled prices to their highest levels seen for a prompt month contract since early February. With the April contract set to expire on Tuesday, daily price volatility is expected to continue.

For the week ending 3/18, the EIA reported a withdrawal of 51 BCF from storage. Storage inventories now stand at 1.389 TCF which is 20.9% below year ago levels and 17.4% below the previous 5-year average. Milder temperatures for the week ending 3/25 decreased the amount of heating degree days (HDDs) nationally and early expectations are for an injection of 25 BCF to be seen on next week's report. However, cooler forecasts for the end of March and beginning of April might lead to an additional weekly withdrawal before the injection season officially starts.

Natural gas demand continues to outpace natural gas supply growth. Daily natural gas production is currently seen at about 95 BCF/day. LNG demand is running at full bore and is expected to continue to do so for the foreseeable future. 70% of all LNG shipments from the US are now heading to Europe to help eastern European countries replace gas supplies normally provided by Russia. The US power generation sector will start ramping up demand as the cooling season is set to begin soon. With Russia being the largest exporter of coal to eastern Europe, global coal prices are soaring as the war in Ukraine rages. Coal is no longer looking like the "marginal" or most economic fuel source in the US for power generators who have the ability to switch between natural gas and coal. This puts more pressure on natural gas to play a bigger role in meeting cooling demand needs this summer. This directly impacts the ability to potentially refill storage to adequate levels for heating season 2022/2023 where prices are already nearing $6.00 for some winter months. Mitigating near and long-term price risk is advised for all end users.