- This topic has 2 replies, 3 voices, and was last updated 1 month ago by Edward Sheldon.
US Natural Gas soars to three-year highs, but in comparison, WTI crude is fighting hard to stay north of $60.
Since the start of the North American winter season in October, Henry Hub natural gas futures have been climbing relentlessly to new long-term highs. Last week, prices rocketed to $5 per 10K MMBtu (British Thermal Unit), the highest level since late 2022.
For one, US energy demand for gas is continuing to rise. Winter is a yearly occurring, seasonally-induced factor that increases the burning of gases to heat buildings.
But due to surging LNG (liquified natural gas) exports, domestic demand are not being met adequately. According to the news agency Reuters, America’s “exports from its eight main LNG terminals hit a record 12 billion cubic meters (bcm) in November, a 20% rise from a year earlier.” [1]
Another bullish factor underpinning the elevated gas prices is the infrastructure bottleneck.
According to one report: “Between 2010 and 2022, natural gas demand rose by 49%, but pipeline (26% growth) and storage (2% growth) capacity grew far more slowly, creating bottlenecks that threaten economic growth.”
As such, natural gas fields are not reaching the intended market.
Lastly, the surging needs of AI is fuelling natural price volatility.
What’s interesting to see is that European gas prices are not rising in tandem with US gas prices. In other words, there’s no global shortage of the fuel.
Should one participate in natural gas’ tantalising advance? Yes and no. First, a word of warning. After a 100 percent gain in four months, a consolidation may happen.
Two, energy prices are proned to spikes. Chasing after a huge bull run may quickly lead to steep losses due to counter-trend price moves.
In view of this, perhaps one should look to natural gas producers. EQT (US:EQT), the largest natural gas producer in America, is one such company.
Its long-term price chart is pointing towards a massive upside breakout at $60. Could be worth a bet if this breakout materialises.
[1] https://www.reuters.com/markets/commodities/us-lng-exports-will-shrink-if-margin-squeeze-intensifies-2025-12-04/
[2] https://www.energyintel.com/0000019a-eb7a-d183-a79a-efff1a620000
US Natural Gas prices have added +11.47% over the last month and are up +33.10% over the year to date. Though prices are well off of the peak seen on December 5th. In fact Jan 26 futures- the current front month contract are some -12.0% below the spike seen in the first week of December.
It’s not uncommon for natural gas prices to spike higher in winter months, particularly if the meteorologists forecast a cold snap.
Gas prices are sensitive to temperature changes simply because when its cold people tun their heating up. Conversely prices drop if the weather forecasters point to milder temperatures.
And that’s what happened on Monday
“Jan Nat-Gas prices plunged on Monday after updated weather forecasts showed US temperatures warming mid-month, potentially curbing Nat-Gas heating demand. Forecaster Atmospheric G2 said that the forecast shifted slightly colder over he eastern and southern US for December 18-22, but noticeably warmer elsewhere. Also, other weather models support a broad-scale warmer risk as cold air is confined to Canada.” Barchart.com
From a seasonal standpoint December is a flat month, on average for Nat Gas prices with January Futures losing a little over -0.360%.
That contrasts sharply with the performance of UNG the US Natural Gas Fund, an ETF that tracks the price of natural gas futures. UNG experiences an average decline of -8.13% in December, and has produced negative returns in the last month of the year 68.75% of the time, over the last 15 years.
The differential comes about because of the holdings that UNG has, and the shape the Natural Gas futures curve for example May 2026 futures trade at around $3.75 versus $4.84 for January.
If you want to trade Natural Gas or Nat Gas related equities then it make sense to keep and eye on US/ North American weather forecasts and temperatures.
I can think of a few reasons. For a start, it has been very cold in parts of the US recently. I was over in Minnesota for Thanksgiving and it was -10 deg celcius or colder on many days. We also got a ton of snow, which isn’t that common for that time of year. That kind of weather is going to increase demand for natural gas significantly due to the fact that it is used for heating. Note that gas storage drawdowns around then were larger than expected. For example, a report from the Energy Information Administration (EIA) on 20 November showed a drawdown of -14 billion cubic feet, surpassing the expected reduction of -12 billion cubic feet.
Another factor at play is US exports. Recently, the US has been shipping record amounts of natural gas overseas. Europe has been a dominant buyer of US liquified natural gas (LNG) due to the fact that it is moving away from Russian pipeline gas. Here, countries like the Netherlands, France, Spain, and the UK have all been buying. Countries in Asia and Latin America have also been buyers of the commodity. This has left less of a cushion for US domestic needs. As a result, supply and demand dynamics have pushed prices up.
It’s worth noting that natural prices have come down a little bit recently. Milder US weather forecasts for the Christmas period and less storage drawdown than expected in the week to 28th November have been two drivers of the weakness.
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