Natural gas rises 9% to the highest level since 2008 due to the impact of the war in Russia

A liquefied natural gas tanker docks in Japan, on December 17, 2021. If Japan were ever to abandon Russia’s Sakhalin energy projects and its stakes were acquired by Russia or a third country, it would weaken the effectiveness of Western sanctions. and it would benefit Russia. Japan’s industry minister said on Friday.

Kiyoshi Ota | Mayor Bloomberg | fake images

US natural gas rose to the highest level in nearly 14 years on Tuesday as Russia’s invasion of Ukraine wreaks havoc on global energy markets.

Henry Hub prices rose more than 9% at one point to a session high of $8,169 per million British thermal units (MMBtu) during morning trading on Wall Street, the highest level since September 2008.

The contract subsequently pulled back from its high, ending the day at $7,954 per MMBtu for a 6.4% gain.

Campbell Faulkner, senior vice president and chief data analyst at OTC Global Holdings, said the increase was triggered by a “surge of tighter market conditions,” including the European Union considering a sixth round of sanctions against Russia that could include the nation’s energy complex.

Additionally, production is down in the US and gas in storage is 21% lower than this time last year.

“Increased energy consumption this summer with zero coal gas… the change will reduce the amount of spare gas for storage fill, which is driving up prices in a classic commodity cycle (“pullback”) to go gas to the market now,” he added. .

Over the past two sessions, natural gas prices have risen more than 8%, following a nearly 30% gain in April. The rapid upward price action, which is also being driven by rising US demand for liquefied natural gas, is adding to inflationary pressures throughout the economy. For example, consumers’ electricity bills are rising as utilities pass on their higher input costs.

EBW Analytics also noted changes in weather patterns as demand for natural gas increases as warmer temperatures usher in air conditioning season.

“However, a faster-than-expected turnaround is the main driver to the upside as traders take advantage of the early-season heat in Texas, and any further changes in the weather model could lead to a challenge from recent highs,” he added. the signature.

Energy was the best performing S&P 500 group on Tuesday, up more than 2%.

Francisco Blanch, managing director of Bank of America, also pointed out that the rise in coal prices is driving the increase in natural gas. He said natural gas could go even higher.

“We have an energy crisis. I think one of the big issues that will help provide some relief is if we have a major economic slowdown, also known as a recession, but of course nobody wants that to happen,” he said. saying.

“I am quite concerned about the state of the energy market. Hopefully we will see some supply responses. Hopefully producers in the US and elsewhere will react to high prices, but there is no imminent relief for consumers.” Blanch added.

Add Comment