Wednesday NG Good News: Hot AND Cold Weather Together in USAFront-month June 2022 prices spiked 48 cents or 6.1% to settle at $7.95/MMBTU after trading as high as $8.16/MMBTU intraday. It was the highest close since August 28, 2008, just topping the $7.82/MMBTU from April 22 a few weeks back.
First and foremost, soft natural gas production continues to be the headliner. Output has languished in the 92-93 BCF/day range since the late-April drop in response to power outages and freeze-offs in North Dakota and increased seasonal maintenance in Appalachia, up less than 1 BCF/day year-over-year. While maintenance operations are expected to subside over the next 7 days, the longer than output remains under 95 BCF/day, the less and less likely it is that production will be able to set new highs before the end of the second quarter, which I have repeatedly touted as necessary for gas prices to see a sustained pullback.Additionally, the near-term computer models have converged towards a significant pattern shift over the next two weeks. As has been discussed at length, April and early May have been consistently colder than normal, allowing residential & commercial heating demand to persist later than usual, pushing the storage deficit versus the 5-year average back above -300 BCF. Now, both the GFS and ECMWF are forecasting a rather rapid transition from this predominantly heating demand-driven pattern to a cooling demand-driven pattern, effectively bypassing much of the typical demand-minimum Shoulder Season. By this weekend, cities such as Dallas, TX and Houston, TX could challenge the 100F mark while even the densely-populated East could get in on the heat.