Natural gas surges to highest level since 2008 as Russia war upends energy markets

U.S. natural gas prices surged to their highest level in more than 13 years on Monday amid a global energy crunch due to Russia’s war on Ukraine and forecasts calling for cooler spring temperatures.
Futures rose 10% to a high of $8.05 per million British thermal units, the highest level since September 2008.The gains build on recent strength, with natural gas rising for five straight weeks.
“The impact of the conflict between Ukraine and Russia on the North American gas market is likely to be long-term,” said David Givens, director of North American gas and power services at Argus Media.
U.S. natural gas prices have now risen 108% this year, adding to inflationary concerns across the economy.The move is less extreme than in Europe, where gas futures have risen to record levels as the EU scrambles to wean itself off Russian energy.
The U.S. is now sending record volumes of LNG to Europe, pushing up prices in Henry Harbor.
“LNG exports have become more important as demand from geopolitical and power generation/industrial uses is strong. The U.S. role as an exporter continues to increase,” RBC noted.”A largely constructive backdrop has been driven by record LNG outflows, strong Mexican exports and producer discipline,” the company added.
Producers have kept production in check amid rising prices, and inventories are now 17% below their five-year average, according to Campbell Faulkner, senior vice president and chief data analyst at OTC Global Holdings.
“This time last year, the U.S. started to look like Europe, breaking the recent seasonality and shifting the curve to a constant demand scenario,” he said.
Faulkner added: “The war between Asia and Europe for spare LNG cargoes is also putting additional pressure on gas, which will inevitably be diverted from the U.S. West Coast and New England into next winter.”
Still, not everyone is convinced the rally will last.Citi raised its 2022 base-case Henry Hub price target by 40 cents to $4.60 per million British thermal units, well below where the contract currently trades.
“[A] combination of factors could increase demand and slow production growth, but as prices surge, the market may overestimate its impact,” the company said.
Shares of natural gas producers EQT Corp., Range Resources and Coterra Energy hit new 52-week highs in Monday’s trading.Range and Coterra rose more than 4%, while EQT rose nearly 7%.
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Post time: May-11-2022