US Gas Rally Accelerates

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US natural gas futures solidified its foothold above $3/MMBtu this week as the Nymex July futures contract staged a four-session 28¢ rally to $3.496/MMBtu. Barring a historic freefall, July futures will surely expire on Monday at the highest price seen since the January 2019 contract rolled off the board at $3.647/MMBtu. This week's rally was all the more extraordinary as it was the strongest in a months-long advance, said Tethys Partners Chief Market Strategist Bob Iaccino. Gas futures have risen in four of the past five weeks and in 11 of the last 15 as fundamentals have grown progressively more bullish. Notably, the 12-month and full-year 2022 strips are both well over $3/MMBtu, indicating that this rally is not just a near-term phenomenon. Until this month, it's been years since an upcoming year's strip has had a $3 handle. Near-term risks to prices have been largely balanced by strong cooling loads, modest gains in gas production and maintenance at US LNG terminals -- but that is about to change, cautioned Goldman Sachs analyst Samantha Dart. "As we move into winter and [into 2022] we see US gas balances increasingly more dependent on oil,” she predicted. “Specifically, we expect Permian associated gas production to drive 1.7 Bcf/d of the 2.3 Bcf/d total US gas production growth we expect next winter versus current levels.” However, by winter 2022-23 Permian gas production could once again be bottlenecked. "Unless incremental takeaway capacity from the basin is added, oil will once again take the backseat, bringing natural gas fundamentals back as the main drivers of the gas market," Dart said.

Gas Demand, Gas Inventories, Gas Supply, Gas Prices
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