US natural gas inventories increased by 71 Bcf for the week ending May 14, compared with the five-year (2016–2020) average net injection of 87 Bcf and the market consensus of 67 Bcf. Working gas stocks total 2,100 Bcf, which are 87 Bcf lower than the five-year average and 391 Bcf lower than last year at this time. The week started with an impressive run up on pricing Monday following updated near term weather showing the first real heat in major consuming areas for this week. Technical resistance around $3.0 was surpassed in Monday trading only to have pulled back Tuesday through today. Reaction to the slightly surprising injection number this week saw prices off $0.03 -$0.04/dth in prompt and near months. Dry gas production increased to over 92Bcf while exports of LNG and pipeline capacity to Mexico remained constant. Next week is likely to be a bumpy ride with the expiration of the June contract and the possibility of our first “triple digit” injection of the season. Longer term prices have retained their excellent value with approximately $0.40/dth in backwardation all the way into 2025. Given that storage is trailing last year by 15% this discount is not likely to hold up for long.
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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