While most mainstream news coverage of natural gas prices continues to point towards increased global demand this upcoming heating season, what’s been mostly overlooked is the upwards momentum that’s quietly creeping into the back end of the futures curve. Despite near-term winter contracts (Nov21 to Mar22) closing down last week, the average price for Calendar Years 2022 and 2023 rose over 2% and 3%, respectively. Fundamentally speaking, while there’s very little supporting the $5+ pricing seen in the near-term winter contracts, stagnant daily production combined with the looming threat of LNG exports growing beyond 2022 are undoubtedly reasons to consider a hedging strategy that takes advantage of the depressed prices in outer years.
Weather forecasts for the balance of October and the early days of November show above-average warmth throughout most of the Lower 48, with heating-degree-days trending lower than the same time last year. This should yield modestly sized injections into storage over the next three weeks and put downward pressure on the November contract price ahead of settlement on Wednesday, October 27th.
EIA Storage Report
For the week ending 8 October, EIA reported an injection of 81 Bcf into underground storage (NUS estimated a 97 Bcf injection and the market expectation was an injection larger than 90 Bcf.) Inventory levels are now at 3,369 Bcf which is 501 Bcf less than the same week last year but only 174 Bcf below the five-year average. Daily production was down slightly to 92.9 Bcf/d compared to 93.4 Bcf/d the previous week. NUS estimates that an injection between 85 and 90 Bcf will be reported by the EIA for the week ending 15 October, which would push inventories over 3,400 Bcf with roughly four weeks left of injection season remaining.
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