Natural gas surges to 13-year high
U.S. natural gas surged to a 13-year high, briefly breaking above $8 for the first time since 2008, as robust demand tests drillers’ ability to expand supplies.
Front-month futures closed 7 percent higher in New York on Monday. The last time prices were this high was August 2008, when hurricanes menaced offshore gas platforms in the Gulf of Mexico and searing summer weather stoked demand for power to run air conditioners. Back then, prices only began to drop when the broader economic outlook turned dark ahead of the historic worldwide financial crisis.
This year’s gas rally has been driven by a global fuel crunch that’s rippling across markets as suppliers struggle to meet a post-pandemic surge in consumption, further exacerbated by Russia’s war in Ukraine.
Backup inventories held in underground caverns and aquifers are below normal for this time of year and the U.S. is exporting every molecule of liquefied natural gas possible to help Europe reduce its reliance on Russian energy supplies. At the same time, production remains below prepandemic levels, despite government forecasts calling for record production from the Permian basin this Spring.
Mild weather could bring
prices back down the $3 to $4 range, said Bob Yawger, director of the futures division at Mizuho Securities. Similarly, a boost in inventories could “put the brakes” on the rally, he said.
But for now stockpiles remain almost 18 percent lower than usual while below normal temperatures are expected across parts of the northern U.S. from April 25 to May 1. A shortage of coal in the U.S. has also helped fuel the gas rally, limiting power generators’ ability to switch fuels.
Futures in New York are now the most overbought in nearly four years, with the 14-day relative strength index
climbing above 86 Monday.