The Weekly Natural Gas Market Newsletter May 16, 2022
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.
