US natural gas inventories increased by 15 Bcf for the week ending April 23, compared with the five-year (2016–2020) average net injection of 67 Bcf and the market consensus of 13 Bcf. Heading into the expiration of the May 2021 contract we saw an impressive $0.31/dth climb to the close at $2.95/dth. Concerns over where storage may finish at the end of the injection season were fueled by dry gas daily production dropping below 90Bcf for the first time in more than one year. Failure to inject strong reserves into storage in May and June will place significant pressure on the late season injections [September and October]. If we find ourselves hopeful for late season inventory builds we may not understand how short of last year’s peak storage levels we will be until late in the season. At that point we may find ourselves with significant price escalation in a relatively short period of time.
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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