Daily Market Update August 17, 2022
Early Morning Update
The Sep ‘22 natural gas contract is trading up $0.27 at $9.60. The Sep ‘22 crude oil contract is down $0.03 at $86.50.
Summary
There was a big shift higher yesterday in the natural gas market as the September prompt month contract moved up 60 cents to close at $9.329/MMBtu. This is the highest close for a prompt month contract since 2008, beating out the run-up back in early June by less than a tenth of a cent. The winter strip of November 2022 to March 2023 followed closely behind as it gained just under 53 cents and the 12-month strip showed upward movement of 41 cents. The calendar strips shifted higher, as well, with 2023 moving up 29 cents to $6.374, Cal 2024 gained 11.4 cents, and 2025 moved up 5.2 cents. Beyond 2025, all calendar strips through 2034 moved up 3.9 cents. The backwardation stretches out to 2027, which sits at the low point of $4.589. The drivers for yesterday’s upward momentum could be the continued high natural gas demand for power generation (5.4 Bcf/d higher so far this August compared to last year) and the stagnant production output that has moved below 95 Bcf/d for two days in a row now. Updated weather forecasts show much of the high heat shifting to the Pacific Northwest and away from the Midcontinent, South, and eastern U.S., and we could see the power burn ease through the end of the month as a result.
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