Natural gas prices experienced a bit of a rally to close out the end of the year and the January 2022 NYMEX contract settled at $4.024 per MMBtu. For much of December, the current La Nina pattern in the Pacific Ocean set up cooler and stormier conditions in the Pacific Northwest, and warmer and drier conditions across the South. The Sierra Nevada experienced its snowiest month on record in December, where a healthy snowpack and increased rainfall in California and the Pacific Northwest will help to increase available hydro-generation for 2022 and reduce potential price volatility. Across much of the United States, above-average temperatures led to one of the warmest Decembers on record. The decrease in demand for heating allowed U.S. natural gas storage to significantly reduce the deficit to last year and the five-year average. To start 2022, the Energy Information Administration reported a withdrawal of 179 Bcf for the first week of 2022. Natural gas storage is now 6.2% below last year’s level and 2.4% above the five-year average, for the same reporting week. To conclude the month, colder temperatures arrived in the Northeast and the MidAtlantic faced their biggest snowstorm of the winter. A reduction in supply and increase in demand sent spot prices higher, while NYMEX also reacted to the change in the weather pattern. The February contract now sits in the prompt position and surpassed $4 per MMBtu last week. Global gas prices also pushed lower after Christmas, as warmer weather in Europe and Asia weakened demand and a high number of LNG cargoes were expected. Natural gas supply from Russia continues to be low and pricing has since started to rebound, with another cold snap making its way to Europe. The EIA recently announced that it expects Henry Hub’s natural gas prices to average near $3.79 per MMBtu in 2022.
