US natural gas inventories increased by 71 Bcf for the week ending May 7, compared with the five-year (2016–2020) average net injection of 82 Bcf and the market consensus of 74 Bcf. Working gas stocks total 2,029 Bcf, which are 72 Bcf lower than the five-year average and 378 Bcf lower than last year at this time. We continue to fall behind last year’ and the five year average due to lagging production and increased demand [LNG exports, pipeline exports to Mexico, industrial demand for power burn]. Technical support to the upside is around $3.03 and if we break through that level we could run all the way into the mid $3.20’s. The next few days could be very interesting to see if prices break through into a new, higher trading range, or do they retreat into what we have seen recently [$2.90 - $3.00]. With limited early confidence, major consuming areas should not experience unanticipated weather demand until closer to the end of the month. Early indications on injections next week will see us fall further behind the five year average and last year. Should that pattern continue and we get the above average temperatures projected for the end of the month we could see prices get a “one, two punch” upward.
End users with exposure to natural gas prices for the next few years need to practice diligent and prudent risk management. With exceptional value currently seen in the deferred years, end-users need to be FORWARD thinking to manage their long-term risk exposure to the natural gas market.
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