Natural gas futures are skyrocketing in the middle of the trading week, spiking 16% on an approaching blast of Arctic temperatures and the geopolitical tensions at the Ukraine-Russia border. The energy commodity has been the world’s top-performing asset as it looks to hit $6. Can this momentum be sustained?
March natural gas futures soared $0.778, or 16.38%, to $5.529 per million British thermal units (btu) at 18:22 GMT on Wednesday on the New York Mercantile Exchange. Natural gas prices have been on a tear this year, advancing 55% year-to-date.
So far this year, there have been many factors contributing to the energy product’s meteoric ascent.
Right now, the top development for its immense gain has been the pending winter weather that will blanket many parts of the US. Forecasts suggest that subzero temperatures and snow covering the country, lifting demand for electricity and heating. The approaching storm is expected to travel as far south as Texas, potentially giving the state a repeat of last year.
It is being reported that natural gas demand will be noticeably high for the next several days as, according to NatGasWeather, “an Arctic blast spreads south and east out of the Midwest with frigid lows of -20s to 20s, including lows of 0s to 30s into Texas and the South, along with snow and ice.”
“The market awaits a potentially dichotomous outcome surrounding the risks of widespread freeze-offs in Texas later this week,” said EBW Analytics Group’s senior analyst Eli Rubin.
This could result in freeze-offs that would impact production and lead to supply disruption. US natural gas output has fallen to as low as 93 billion cubic feet per day, down from the recent December peak of 97 billion cubic feet.
Ahead of Thursday’s storage weekly report, the market is speculating that the Energy Information Administration (EIA) could report a withdrawal of 280 billion cubic feet.
Meanwhile, tensions continue to be serious at the Ukraine-Russia border. This is a serious issue since Europe is desperate for energy, Ukraine is a major transit route, and Russia is a major exporter of natural gas.
In other energy commodities, March West Texas Intermediate (WTI) crude oil futures dipped $0.01, or 0.001%, to $881.9 per barrel. April Brent crude futures rose $0.20, or 0.22%, to $89.36 a barrel. March gasoline futures jumped $0.0302, or 1.16%, to $2.605 per gallon. March heating oil futures picked up $0.0235, or 0.86%, to $2.7649 per gallon.