US natural gas inventories increased by 14 Bcf for the week ending March 26, compared with the five-year (2016–2020) average net withdrawal of 24 Bcf. Working gas stocks total 1,764 Bcf, which are 36 Bcf lower than the five-year average and 225 Bcf and lower than last year at this time. The somewhat surprisingly early end to withdrawals was bolstered by the EIA adjusting the week ending March 19 upward by 4Bcf. A cooler than normal week in major consuming areas has the market trending up pennies and is balanced by early April weather showing above-normal temperatures for most of the country.
Nothing is expected to drive prices out of the well-established trading range over the next few weeks as the weather is projected to be consistently seasonal. Demand for exports (LNG and pipeline into Mexico) remains very strong at 11.8Bcf/day but is near maximum levels, so until additional export assets are developed, we will likely see these levels maintained. The next few weeks will provide great opportunities to seize value in the outer years of 2023-2025 as futures are basically flat to the near term. Things to watch in coming weeks will be the rollout of the Biden Administration energy plan and the potential impacts to the oil and gas industries.
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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