The Weekly Natural Gas Market Newsletter

October 31, 2022

Natural Gas News & Notes

The November NYMEX natural gas futures contract expired at $5.186 on Thursday. The November contract took over as the prompt month contract near the end of September opening trade at $7.03. The contract posted a high of $7.19 and a low of $4.75 during its time as the acting front month contract. The contract's low of $4.75 last Monday morning marked the lowest pricing seen for a prompt contract month since the middle of March. Considering that the November contract posted a high of $10.04 at the end of August, the collapse below $5.00 represented over a 50% loss in value in less than 2 months' time. The combination of both near-term bearish fundamental data and technical price drivers led the push lower in the value of the November contract.

For the week ending 10/21, the EIA reported an injection of 52 BCF. This was slightly smaller than most analysts had expected. Total storage now stands at 3,394 BCF which is 4% below year-ago levels and 5.5% below the previous 5-year average. With the traditional injection season rapidly coming to an end, projections are that storage will ultimately end up being in the 3,500-3,600 BCF range by the time heating season begins.

Increased daily production and weakened natural gas demand have temporarily taken the air out of natural gas' sails over the last few weeks. However, with the start of the heating season looming and expectations that the Freeport LNG facility will soon begin operations, the drop in natural gas prices might prove to only be temporary. An expected tighter supply and demand balance will likely put a floor on natural gas pricing and lead to both the continuation of price volatility and more upside price risk than downside price gain.