Natural gas futures are exploding to kick off the trading week, topping $9 on heat and lackluster domestic output. The energy commodity is on track to hit $10 should it sustain this momentum heading into season of strong demand. But investors might also be looking at winter and the possibility of chaos.
July natural gas futures skyrocketed $0.796, or 9.34%, to $9.319 per million British thermal units (Btu) at 18:10 GMT on Monday on the New York Mercantile Exchange. Natural gas prices had come off a weekly gain of about 7%, adding to their year-to-date spike of 160%. Over the last 12 months, natural gas has soared more than 200%.
The latest weather forecasts are pointing to rising temperatures in many parts of the US, particularly in the South and Midwest regions. Temperatures could be touching in the 90s, adding to cooling demand that could intensify this month. But this might be offset by cooler expectations in the Northwest and Northeast.
Still, because of the fluctuations in temperatures, EBW analyst Eli Rubin wrote in a research note to clients: “We wouldn’t be surprised if it turns out to be the most violent trading week of the past decade depending on weather and production trends in the coming days.”
Meanwhile, natural gas production might be lackluster, too. The latest numbers have come in below many estimates, suggesting that companies are not taking advantage of these sky-high prices and demand is escalating.
Indeed, industry observers had been warning this year that exploration and production were disappointing. Now that interest rates are on the rise, and many investors are putting all their eggs in the green energy basket, the situation could worsen.
Over the coming months, the only hope for the natural gas market is a steady injection in the weekly storage inventories. They have been healthy since the beginning of spring, which is critical heading into winter.
Market experts are already warning that the US and Europe could experience tighter supplies amid strengthening demand. But market conditions could deteriorate in the US because the world’s largest natural gas producer will need to satisfy increased foreign demand and ensure there is enough at home.
In other energy commodities, July West Texas Intermediate (WTI) crude oil futures dropped $0.50, or 0.42%, to $118.37 per barrel. August Brent crude futures slipped $0.18, or 0.15%, to $119.51 a barrel. July gasoline futures were unchanged at $4.2474 per gallon. July heating oil futures advanced $0.1062, or 2.48%, to $4.3865 a gallon.