Natural gas rises to highest level since 2008 as Russia’s war disrupts energy markets

US natural gas prices rose to the highest level in more than 13 years on Monday, as Russia’s war against Ukraine sparks a global energy crisis and forecasts point to cooler spring temperatures.

Futures rose 10% to trade as high as $8.05 per million British thermal units, the highest level since September 2008. The jump builds on recent strength, with natural gas coming off five consecutive positive weeks.

Prices later pulled back slightly, with the contract ending the day 7.12% higher at $7.82.

“The impact of the Ukraine-Russia conflict is likely to be long-lasting for North American natural gas markets,” said David Givens, head of energy and natural gas services for North America at Argus Media.

EBW Analytics added that a “bullish climate change” has sent the US market into “overdrive”.

For the year, US natural gas prices rose 108%, adding to inflation concerns across the economy. The move is less extreme than in Europe, where natural gas futures have risen to record highs as the bloc strives to move away from reliance on Russian energy.

The United States is now shipping record amounts of liquefied natural gas to Europe, driving up Henry Hub prices.

“LNG exports have become more important with geopolitics and demand from both power generation and industrial use is strong. The role of the US as an exporter continues to increase,” RBC noted. “There is a fundamentally constructive backdrop buoyed by record LNG departures, strong exports from Mexico and producer discipline,” the firm added.

Amid rising prices, growers have kept production in check, with stockpiled inventory now 17% below the five-year average, according to OTC Global Holdings Senior Vice President and Chief Data Analyst Campbell Faulkner. .

“[T]The US is starting to potentially look like Europe this time last year, crushing short-term seasonality and shifting the curve to a constant demand scenario,” he said.

“Additional pressure on natural gas is also coming from the battle between Asia and Europe over spare LNG shipments that will inevitably be diverted from the US West Coast and New England this coming winter,” Faulkner added.

Still, not everyone believes the rally is here to stay. Citi raised its 2022 Henry Hub base case price target by 40 cents to $4.60 per million British thermal units, significantly below where the contract currently trades.

“[A] The combination of factors could increase demand and slow production growth, but the market could be overestimating their impacts as prices rose,” the firm said.

Shares of natural gas producers EQT Corp., Range Resources and Coterra Energy hit 52-week highs in trading Monday. Range and Coterra gained more than 4%, while EQT jumped almost 7%.

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