TPI Takeaway

WARMER TEMPS FROM THE SOUTH WILL MEAN MORE COOLING DEGREE DAYS

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Warmer weather will increase the amount of demand for Natural Gas as air conditioners turn on all over the country. This higher demand could push the market above $9.00 this week.

MARKET BOUNCES IN MID $8.00 RANGE, AND WILL LIKELY MOVE HIGHER

EIA chart

STORAGE AND PRODUCTION PROBLEMS PERSIST.

  • Production last week dropped by almost 2.0 Bcf/d, keeping the market volatile despite a better-than-expected storage report of +90 Bcf on Thursday.
  • Some experts say that this storage report or next weeks may be the peak storage of the spring and summer, so we may have our first summer without a triple-digit storage number in over a decade if we do not reach +100 this coming report.
  • The higher temps moving across the country will result in more cooling degree days and more demand. This will likely push the market above $9.00 this week.

What Is Henry Hub? 

Henry Hub is a natural gas pipeline located in Erath, Louisiana, that serves as the official delivery location for futures contracts on the New York Mercantile Exchange (NYMEX). 

NATURAL GAS STORAGE REPORT

EIA chart
  • Projections for storage are very bleak with lagging production, higher demand, and growing exports. As a result, much of the pricing we see now reflects investors’ worry that we are heading for a storage crisis next winter.
  • The EU has put sanctions on Russian oil, but only the oil arrives by ship. The oil is still flowing via pipeline to some countries like Hungary and Slovakia. No natural gas sanctions have been announced yet and will be a last resort from the EU.
  • It is worth repeating, Natural Gas pricing is expected to average ~$8.50 in the second half of 2022 and is not expected to drop significantly until April/May of 2023. 2023 is expected to be just $4.74 due to the increase in production we currently miss and a slowing or plateau of exports.