US natural gas inventories increased by 38 Bcf for the week ending April 16, compared with the five-year (2016–2020) average net injection of 37 Bcf and NUS’ projection of 49 Bcf. Working gas stocks total 1,83 Bcf, which are 12 Bcf higher than the five-year average and 251 Bcf lower than last year at this time. Surprisingly cool weather caused increases in heating demand for many parts of the country causing a slightly smaller build than expected. This caused the market to rally up slight after storage results were released. With the May contract expiring next week and roughly a $0.08/Dth spread to the June contract we are watching to see if the market can sustain pricing above $2.75/Dth and push beyond recent range bound trading. Weather will continue to drive prompt and near month price volatility while extended terms [2022-2025] remain great values at present time with at least $0.20/Dth backwardation to current pricing. With the first forecast above average seasonal weather for major consuming areas next week, if the market can sustain pricing above $2.75/Dth it is conceivable that a new, higher range bound trading could be fueled by warmer weather. We remain conscious of reduced daily production levels year over year and continue to watch longer term influences such as the Biden administration’s plans for decarburization.
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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