Prepare for volatility in natural gas markets


U.S. natural gas price volatility is expected to continue over the next several weeks and into the winter as a number of up and down factors will alternate to affect market sentiment and prices.

Record US exports of liquefied natural gas (LNG) are expected to support the benchmark price of natural gas in the United States to Henry Hub, while a resurgence of COVID cases in many parts of the United States and Europe could slow demand for gas if economies also slow in the middle newly imposed restrictions and blockages.

Winter weather in the northern hemisphere is the biggest wildcard for natural gas prices in the coming months. A colder-than-normal winter could push prices higher as the tight European gas market becomes even tighter, impacting prices elsewhere, particularly in Asia. If the Asian winter is also colder than usual, higher prices are to be expected, leading to an increase in additional US LNG exports due to the lower Henry Hub prices compared to benchmarks in Europe and Asia. Strong and sustained US LNG exports in turn tighten the US market and push up the US natural gas benchmark.

US LNG exports reached near-record levels in recent weeks against a backdrop of record shipments to China in recent months.

After a year without US LNG shipments to China between March 2019 and February 2020, due to the trade war, US exports to China began to increase towards the end of last year to reach a record high in August. 2021, the last available EIA data shows.

So far in November, the gas supply volume to U.S. LNG export facilities has been higher than in October and close to the monthly record for April 2021, according to Refinitiv data cited by Reuters. So far in November, gas volumes going to U.S. export plants have averaged 11.1 Bcf / d, down from 10.5 Bcf / d last month and slightly down from the monthly record April of 11.5 Bcf / d.

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Friday, November 19, the volume of gas shipped to US LNG export facilities was estimated by Refinitive for having reached a record level of 12.03 Gcf / d, up from the previous record of 11.99 Gcf / d at the end of March 2021.

Due to near-record exports, US natural gas futures rose 6% in the week to Nov. 19, after falling 13% the week before, according to Reuters estimates.

Monday, November 21 prices opened lower and traded below $ 5 per million British thermal units (MMBtu), after stabilizing above $ 5 on Friday.

According to Satendra Singh from investing.com, this week’s decisive point for the immediate direction of Henry Hub price would be the $ 5.562 / MMBtu level, with a lasting move above that level this week signaling an uptrend and a lasting move below suggesting potential selling. .

Colder weather this week would support prices, as U.S. domestic demand for natural gas is estimated by NatGasWeather.com oscillate between moderate and high as a cold weather system with traces of rain and snow across the Great Lakes and the east earlier this week.

U.S. natural gas prices averaged $ 5.51 / MMBtu in October and are expected to average $ 5.53 / MMBtu from November to February, according to the EIA noted in its latest Short-Term Energy Outlook (STEO). Prices have been high in recent months due to stocks below the five-year average.

Help feed the hungry for Thanksgiving

“Despite high prices, demand for natural gas for power generation has remained relatively high, which, along with strong global demand for US liquefied natural gas (LNG), has limited downward pressure on gas prices. natural gas, ”the EIA said.

“We expect U.S. inventory draws to be similar to the five-year average this winter, and we expect this factor, along with rising U.S. natural gas exports and relatively stable production through March, will keep gas prices down. natural price near recent levels before declining, price pressures appear, ”according to the US administration.

Downward pressure on prices will emerge next year as high prices are now pushing for increased production, but throughout this winter, especially if it is colder than usual from America to the ‘Europe and Asia, natural gas prices have room to recover further.

By Tsvetana Paraskova for OilUSD

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