The Weekly Natural Gas Market Newsletter

May 16, 2022

Natural Gas News & Notes

For the week ending 5/13, June NYMEX natural gas futures settled down 38 cents to close the week at $7.663. As has been the case for most trading weeks recently, the natural gas market experienced extreme price volatility in trade during the week that saw the June contract trade in a $1.86 range. The June contact posted a high of $8.29 on Monday and the cratered to a low of $6.43 on Tuesday. The dip into the $6.00 range didn't even last the full day on Tuesday. The contract opened Tuesday's trade at $7.03, hit the low of $6.43 and then rebounded to close the day at $7.39.

For the week ending 5/6, the EIA reported an injection of 76 BCF. This was slightly smaller than most analysts had expected for the reporting week. Storage inventories are now 18.6% below year ago levels and 16% below the previous 5-year average. The early estimate for next week's report is an injection of 91 BCF.

Despite no "material" fundamental changes in the natural gas market, the front month contract has seen a $2.50/DTH trading range thus far this month. The increases in price volatility can largely be attributed to the managed money or "non-commercial" traders in the natural gas market. Open interest by this segment of traders is declining in both long and short positions as the costs of trading from a margin perspective have started to skyrocket on the NYMEX/CME exchange. With fewer players trading in the market, volatility will continue to increase. If/when actual fundamental changes start to develop in the market, like sustained heat in major consuming regions that requires a significant amount of natural gas to meet cooling demand for the power sector, daily volatility and further increases in near-term pricing could reach historic levels. End-users with any near-term open exposure to the natural gas market need to seriously consider covering needs to mitigate price risk for this summer and fall.