ENERGY SUPPLY SNAPSHOT:
- Last week saw a robust storage injection of +95 Bcf, breaking a seven-week streak of injections of 100 Bcf or more. Despite this, the injection was still 22 Bcf above both last year’s level and the five-year average.
- Storage inventories are now 6.1% above the five-year average but remain 7.7% below the levels of last year.
- Ongoing missile exchanges between Israel and Iran have pushed oil prices up by over $10.00. This could spur increased U.S. oil production, potentially boosting associated natural gas output.
EIA Natural Gas Storage Report
DEMAND TRENDS
- This week could bring the highest degree day totals in years, signaling exceptionally high demand due to extreme heat. This weather-driven demand initially pushed prices higher last week, but end-of-month profit-taking helped the prompt month settle at $3.83.
- Warmer temperatures have nudged demand higher, especially for LNG. LNG exports are expected to rise to 15–16 Bcf/d in the coming weeks.
NYMEX NATURAL GAS CALENDAR STRIPS
NYMEX 12-Month Strip
ALL ABOUT THE NYMEX TWELVE-MONTH STRIP
- The NYMEX Twelve Month Strip is the average of the upcoming 12 months of closing Henry Hub natural gas futures prices as reported on CME/NYMEX.
- A futures strip is the buying or selling of futures contracts in sequential delivery months traded as a single transaction.
- The NYMEX Twelve Month Strip can lock in a specific price for natural gas futures for a year with 12 monthly contracts connected into a strip.
- The average price of these 12 contracts is the particular price that traders can transact at, indicating the direction of natural gas prices.
- The price of the NYMEX Twelve Month Strip can show the average cost of the next twelve months’ worth of futures.
- The NYMEX Twelve Month Strip is also used to understand the direction of natural gas prices and to lock in a specific price for natural gas futures for a year.
NATURAL GAS PRODUCTION
MARKET STRATEGY: WHAT SHOULD YOU DO?
- Manage Premiums: Aim to minimize supplier premiums on forecasted components. Start by passing through capacity charges—pay actual costs rather than inflated worst-case estimates. If your pass-through capacity decreases, so will your costs. Fixed capacity costs will not fall.
- Hedge for the Future: Consider hedging blocks of energy from early 2028 onward. Natural gas prices for post-2027 delivery are at their lowest in 36 months—now is an opportune time to secure these rates.
AD HUB VS. NYMEX HENRY HUB
RISK ASSESSMENT
- Short-Term: Stay cautious of upside price risks for Calendar 2026. Continue using a portfolio approach to manage volatility. PJM futures could see renewed downside into late spring, presenting a window for risk-averse end-users to lock in recent price declines.
- Mid-Term: Calendar 2026 remains exposed to natural gas price risks, amplified by load growth and tightening reserve margins.
- Long-Term: Market fundamentals appear weak, but a potential recession or warmer-than-average winters could create better procurement opportunities.
6-10- & 8-14-DAY TEMPERATURES
MARKET INSIGHTS
- Speculators, not fundamentals, are currently driving natural gas pricing.
- Yesterday’s 104-Bcf injection, slightly above expectations, pushed the June natural gas contract down 19.6¢ intraday, dampening bullish sentiment. Technicals still point higher, and a mild seasonal dip in supply could offer support.
- Weather-driven demand is mild overall, but a week-over-week gain of 19 cooling-degree days (particularly for Week 2) is supportive. Temperatures may reach 90°F as far north as Minneapolis next week, with the Mid-Atlantic and Northeast also expected to trend warmer into mid-to-late May. However, the end of late-season heating demand is fundamentally bearish.
- Henry Hub spot prices are at $3.73. Cheniere has confirmed heavy LNG maintenance for June. While bullish momentum persists and traders are eager to push prices higher, the near-to-medium-term fundamentals remain soft.
Bottom Line:
Monitor market developments closely, remain flexible in your procurement strategy, and consider locking in favorable rates for long-term stability. Both geopolitical events and speculative trading shapes the current environment, so a balanced approach is essential.