Natural Gas Market Report
Each month, Gas South puts together a natural gas market report to help simplify the updates you need to know about what's happening in the natural gas industry for your business. These updates include NYMEX settlement prices, storage information and more.
Some wild winter weather has been reflected in the month’s pricing outlook, with a cold bout causing price swings that spanned nearly $10. But with milder weather approaching, we’re now looking to the White House’s action on LNG exports to influence market trends.
Recent price dips are defying analyst expectations, due to mild weather and strong storage. But before we call it a trend, we’re keeping an eye on the dynamics in different regions and developments in transmission capacity agreements.
All eyes are on the weather, as total U.S. natural gas consumption has already risen over 16% due to increased demand. And prices are just as unpredictable as the temperature. Based on current market volatility, this winter’s futures are rangebound between $1.68-$6.89.
Forwards have been trending upward—in fact, we have not seen natural gas prices this high since last January. This volatility is due to a variety of domestic and global factors, as well as reports forecasting a significant consumption increase and demand for exports.
With a seasonal shift upon us, we’re seeing both record-breaking consumption levels due to late summer heat and dramatic price swings as the market prepares for cold-weather demand. Furthermore, recent events support natural gas’s significant role in the energy transition and increased demand in the coming years.
NYMEX forwards have stabilized, and the fundamentals inform a steady price sentiment in the near term. However, we’re noticing an unusual spread across the Southeast locational basis this summer, which may make hedging in these areas more commonplace.
Near-term NYMEX prices have retreated toward historic lows, down nearly 80% from last summer’s peak. Our trade desk is seeing bearish fundamentals in the market: Production and storage levels are both exceptionally high, and mild spring temperatures have held both demand and capacity constraints in check.
Bearish fundamentals like warm weather and strong storage inventory continue to weigh heavily on prices. Prompt month prices have declined 75% from late August until now, briefly dipping below $2/MMBtu on February 22.
The NYMEX prompt month contract is trading at levels we haven’t seen since mid-2020. Warm temperatures are leading an array of bearish fundamentals—so much for the groundhog’s prediction for a long winter this year!
Market fundamentals have pivoted and are now overwhelmingly bearish, with the lowest prices in months. Storage inventories have increased, although capacity is increasingly constrained along the east coast, and an increasing demand for LNG exports is likely to create more price support.
Prices are following the weather—when mild temps hit at the end of November, prices plummeted. However, weather forecasts through the Christmas holiday are prompting prices to climb. While European LNG prices are also moving higher, the delay in Freeport LNG terminal’s reopening is keeping domestic prices down.
Futures contracts prices were down 15% over the month, but daily prices remain in flux as traders react to winter weather and the outlook on heating demand.
All eyes are on the weather. While strong, triple-digit storage injections, dry gas production pushing 100 Bcf/day, and a retreat in global LNG prices have created some market price resistance this month, we have the entire heating season ahead of us. That means winter temperatures will be the ultimate wild card for near-term price direction.
With summer winding down, attention is shifting to the heating season ahead. Although market fundamentals remain largely the same, activity in Europe, trends in basis pricing and of course, winter weather, could all have an impact on market prices.
The marketplace remains bullish, with consistent dramatic price swings expected as we look forward to the heating season. What’s more unusual though, is the surge in the Southeast’s locational basis, which are trading at levels unseen in years or never before.
June saw multiple single-day price swings over $1.20, but by the end of the month, contracts fell more than 40%.
Wide fluctuations on the NYMEX continued in June, with over a dollar difference in the highs and lows of daily trade. Although the U.S. has made commitments to help bridge the LNG supply gap, send-out capacity is already at 90%, and a major terminal outage means 2 Bcf/d are offline for several months.
Market volatility continues, as May’s settlement represented more than a 35% increase over April’s expiration, and price conditions are the highest seen since September 2008.
The ongoing conflict in Ukraine continues to upend the natural gas market. Volatility remains high, but the U.S. has been shielded from global prices as it has more than enough supply to meet domestic demands.
Natural gas contracts for March expired at $4.568/Dth. With an outpouring of new developments, from global conflict to regulatory setbacks, time will tell how the fundamentals will be impacted in the near future.
Not since February 2003 has the NYMEX contract had such a delta between the high and low traded price on the day. The wild movement is attributed to a technical short squeeze, lingering cold temperatures at home and mounting geopolitical pressures abroad.
As we embark upon a new year and the winter demand season unfolds, milder temperatures indicate a more balanced outlook on the natural gas market.
December's trading pattern mirrors prior months, with a run-up at the height of the settlement trading activity and a collapse in sessions immediately after. Although the fundamentals have turned bearish, the market is still volatile, and the entirety of winter remains.
Prices were seasawing to extremes throughout October, and it's likely we’ll see the current market volatility continue. Some factors point to positive outcomes, while others won’t improve enough to make an impact.
NYMEX prices are at their highest levels since early 2014. As we move through October, the steady upward march in NYMEX natural gas prices is forecast to last throughout the heating season.