2021 is now in the books and natural gas prices averaged $3.831 per MMBtu for the year on NYMEX, 84% higher than the 2020 annual average. The bulls have lost some steam going into 2022 and natural gas prices have declined nearly 40% since October. The January 2022 contract was trading over $5 per MMBtu in November, settled as low as $3.66 per MMBtu in early December, before settling last week at $3.925 per MMBtu. The U.S. natural gas rig count also increased this week by three units, and oil-directed rigs increased by four. While production continues to grow, demand remains strong, even through milder temperatures. The U.S. Energy Information Administration (EIA) reported a withdrawal of 59 Bcf, which exceed analysts’ expectations of 53 Bcf and compared to an average withdrawal of 55 Bcf. Storage levels are now 2.5% below the five-year average and 9.2% below last year’s levels, for the same reporting week. December is currently on pace to be the second warmest winter on record, behind December 2015, according to Bespoke. Outside of the West Coast, the 8 – 14 day forecast is calling for above-average temperatures for the majority of the U.S. While we still have quite a bit of winter ahead of us, the winter premium added to natural gas prices has declined significantly, as fears of supply concern have eased. Technical analysts are pointing at the potential for lower prices and fundamentals would support that as well, as domestic stockpiles have been able to rebound in response to these milder temperatures. While NYMEX takes into consideration the entire U.S. market fundamentals, regional factors will continue to play a role in basis pricing and electricity pricing.
