Natural gas futures hit their best levels since 2008 before paring much of their monumental gains. The energy commodity soared on the news that Russia would limit its shipments to Europe. With temperatures on the rise, could natural gas remain above $9 for the rest of the month?
September natural gas futures rose $0.141, or 1.65%, to $8.712 per million British thermal units (Btu) at 19:46 GMT on Tuesday on the New York Mercantile Exchange. Natural gas had traded as much as $9.77 before scaling back its exceptional gains. Still, natural gas is poised for a weekly gain of around 20% and is on track for its best month on record. Year-to-date, natural gas is up more than 140%.
It was reported on Tuesday that Moscow’s state-owned energy producer Gazprom PJSC’s natural gas exports through the Nord Stream pipeline 1 to Germany would be cut in half.
This is raising fresh concerns that Europe will be unable to add to its stockpiles ahead of the brutal winter season that could force factories to shut down and households to be cold.
Market analysts warn that Europe might need to import more liquefied natural gas (LNG) from the United States, which would have a hard time trying to satisfy this demand amid lackluster terminal infrastructure and falling production.
Meanwhile, the weather is still playing a critical role in the natural gas market. Although there was a temporary reprieve from the oppressive heat, the overall trends show widespread heat throughout most of the country. In fact, this month is on track to be the fourth hottest July on record.
“Obviously, that is still impressively hot, and the heat is expected to roll on into August, with the current forecast indicating the potential for some record gas-weighted degree days in the first third of the month,” Bespoke Weather Services stated in a note.
Investors will be paying close attention to this week’s storage report from the US Energy Information Administration (EIA). Market analysts are projecting a tepid build of just 11 billion cubic feet, don from last week’s increase of 32 billion cubic feet.
In other energy commodities, September West Texas Intermediate (WTI) crude oil futures declined $1.81, or 1.87%, to $94.89 per barrel. October Brent crude futures slipped $0.33, or 0.33%, to $99.13 a barrel. September gasoline futures shed $0.0404, or 1.3%, to $3.0759 a gallon. September heating oil futures added $0.0476, or 1.38%, to $3.5073 per gallon.