Natural Gas Weekly – October 7, 2021

Natural Gas Price Analysis

More volatility is the story for natural gas report week, October 7, 2021. Although week-over-week prices show a modest loss of the prior week’s price spikes, that’s only part of the picture. On Tuesday, prices hit a 13-year high with the prompt month closing the day at $6.312/Dth and upcoming winter months all breaking $6.400. In contrast, price movement for CY22 and CY23 was more limited.

Fundamental Affirmation

Even though production remained flat over last week and demand slightly increased, this week’s injection into storage at 118 Bcf outpaced last year’s (75 Bcf) and the five-year average (81 Bcf). It also exceeded analysts’ estimates which averaged 110 Bcf. All in all, not a bad week for storage.

More significantly, with mild weather expected through the end of October, it is likely the gap between the end-of-season storage total and the five-year average will all but be erased. As such, it affirms the prices we are seeing now, even after this week’s slight retreat, are not the immediate result of winter supply anxiety.

From Russia, With Love

The more logical explanation is that domestic natural gas prices were moving in tandem with skyrocketing international prices. Driven by low storage levels and supply concerns in advance of winter heating season, European prices in particular set new records. Yet by Wednesday, following Russian promises for added supply, prices across Europe and at home eased. Evident in the modest U.S. price retreat, there’s some concern Russian capacity for increased production is limited. With European storage at a decade-low, whether Russia can – or will – rise to the occasion may impact prices for the upcoming winter.

DEC21, settled at $5.817/Dth, down 17.4 cents
JAN22, settled at $5.910/Dth, down 16.3 cents
FEB22, settled at $5.806/Dth, down 14.5 cents
MAR22, settled at $5.457/Dth down 6.0 cents
APR22, settled at $3.986/Dth down a penny