The Weekly Natural Gas Market Newsletter

May 9, 2022

Natural Gas News & Notes

For the week ending 5/6, June NYMEX futures gained $.799/DTH to settle at $8.043. The contract traded in a $1.777 range during the week posting a high of $8.996 and a low of $7.219. Daily price volatility remains a key theme of this natural gas market.

The EIA reported a storage injection of 77 BCF for the week ending 4/29. This injection was larger than the average expectation of 69 BCF. Storage inventories now stand at 19.6% below year-ago levels and 16.3% below the previous 5-year average. Weekly natural gas storage reports will be watched by traders very closely. Current forecasts for end of season storage levels indicate only about 3.2-3.3 TCF of gas for winter 2022/2023 needs. This is concerning since this is below the "normal" level of storage of 4 TCF heading into a winter season.

As natural gas prices have surged to their highest levels in over 14 years, trading volumes for NYMEX natural gas futures and options has dropped significantly since year-ago levels. Based on the most recent data from the weekly Commitment of Traders report, total reportable and non-reportable Open Interest for natural gas futures was 1.1M lots. This compares to 1.5M lots at this same time last year. A drop in market liquidity provides a perfect recipe for extreme price volatility.

Despite not being able to break above the $9/DTH level this week, it's expected that the market will take another run at this price level and will probably at some point see a front month futures contract trade above the $10/DTH level. With more upside potential than downside gain, any customers with open NYMEX exposure to any gas needs for this summer should be looking to cover their exposure. With the deferred years of cal23,24 and 25 still trading at a substantial discount to front month contract prices, looking to hedge long-term needs and mitigate future price risk is recommended.