Natural gas futures rallied nearly 17% to kick off the trading week, fueled by tighter US storage surpluses. The energy commodity has rocketed over the last month and has put together a solid year-to-date gain. But can natural gas prices hit $3 by the year’s end?
November natural gas futures soared $0.406, or 16.68%, to $2.84 per million British thermal units (Btu) at 18:23 GMT on Monday on the New York Mercantile Exchange. Natural gas has spiked more than 30% in September, lifting its year-to-date increase to 22%.
Traders are building on gains from last week’s storage report that showed tighter domestic inventories. While there was a higher-than-expected US supply injection of 58 billion cubic feet, natural gas stockpiles were fewer than 200 billion cubic feet higher than at the same time a year ago.
The downward trend has been driven by lower production volumes by natural gas companies. Many of these producers have responded to the collapse in natural gas prices since the end of 2022 by curtailing output activity.
Some of the recent declines in natural gas production in the Gulf of Mexico, where 54% of output comes from, after Francine impacted operations. Energy markets are eyeing another storm brewing in the region.
“If it happens again and we lose production, it might give this market a decent rally as some producers have started to cut back output for economic reasons,” said Phil Flynn, an energy strategist at The PRICE Futures Group, in a note.
Additionally, recent outlooks are anticipating tepid autumn weather conditions, with parts of 46 states expecting above-average temperatures. Ultimately, it is going to be a balancing act for natural gas traders.
In other energy commodities, October West Texas Intermediate (WTI) crude oil futures tumbled $0.59, or 0.83%, to $70.41 per barrel. November Brent crude futures declined $1.28, or 1.72%, to $73.21 a barrel. October gasoline futures plunged $0.0689, or 3.38%, to $1.9675 a gallon. October heating oil futures dipped $0.0139, or 0.64%, to $2.1596 per gallon.