Natural gas futures hit highest since February 2014 as surge continues

imageCommodities1 hour ago (Sep 28, 2021 13:20)

© Reuters.

By Samuel Indyk – US Natural Gas Futures traded above $6.00/mmbtu for the first time since February 2014 as the continuing global supply crunch and prospects for cold winter weather pushing up heating demand continues to lift prices.

There are many reasons for the surge in natural gas prices. On the supply side, the recent hurricanes that hit the Gulf of Mexico wiped out production, and although much of it has come back online, the supply issues have meant storage capacity is getting filled at a slower rate heading into winter in the northern hemisphere.

The latest weekly storage report from the Energy Information Administration showed that stocks were 589 Bcf lower than the same time last year and 229 Bcf below the five-year average.

In Europe, inventories are also low as supplies from Russia have fallen below pre-pandemic levels. Some have suggested the lower supplies from Russia are a bid by the country to get approval for the now completed, contentious Nord Stream 2 pipeline to Germany. Russian officials have previously stated that the country could boost gas sales once Germany and the EU approve the pipeline.

Meanwhile, demand on both sides of the Atlantic and in Asia is high and there are fears it could only increase if the northern hemisphere has a particularly cold winter.

Recent forecasts for a second La Niña event could mean colder weather in parts of the northern United States due to the jet stream remaining farther north. If this were the case, then demand for natural gas for heating could swell.

Analysts at Citigroup (NYSE:C) recently said that prices could surge as high as $100/mmbtu if cold weather boosts demand and hurricanes continue to impact supplies.

Looking ahead, the focus will turn to Thursday’s weekly gas storage report. Of note, today sees the October futures expire at the close of trading at 14:30 eastern time.

At 13:16BST, US natural gas futures are trading higher by 8% at $6.19/mmbtu.

Natural gas futures hit highest since February 2014 as surge continues

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