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The Weekly Natural Gas Market Newsletter March 7, 2022

The Weekly Natural Gas Market Newsletter

March 7, 2022

Natural Gas News & Notes

For the week ending 3/4, the April NYMEX natural gas futures contract settled 54.6 cents higher on the week at $5.016. The prompt natural gas futures contract is at its highest level since early February. In addition to seeing gains in pricing for the near-term months, longer-dated pricing for winter 2022/2023 and calendar years 2023 and 2024 also posted strong weekly gains.

For the week ending 2/25, the EIA reported a withdrawal of 139 BCF. This figure was slightly larger than most estimates calling for a withdrawal closer to 137 BCF. Storage inventories are now 11.6% below year ago levels and 13.4% below the previous 5-year average. With the end of the withdrawal season looming, inventory levels appear to be heading towards a balance of 1.5 TCF as natural gas storage heads into the injection season for winter 2022/2023 needs.

The Ukraine/Russia situation continues to throw global energy markets into chaos. Crude oil futures have surged to their highest price levels since 2008. Concerns about Eastern Europe's dependence on natural gas from Russia have sent European gas prices to their highest levels ever seen. Russia supplies over 30% of natural gas to Eastern Europe. Concerns about existing storage levels and building inventories to meet winter 2022/2023 demand have been the primary driver of European gas prices. US LNG demand will remain very strong as many countries try to find alternative natural gas supplies. Coal prices in the US are also experiencing a tremendous rally as export demand is expected to increase as part of the alternative to Russian natural gas supplies. The price increase also means that some US power generators, who can burn natural gas or coal, will likely shift their own operating strategies this summer with coal potentially not looking like the "marginal" fuel source that it did just a few weeks ago. This in turn could mean higher natural demand domestically this summer which would increase concerns about US storage levels heading into next winter.