Prepare for volatility in natural gas markets

Volatility in US natural gas prices will continue over the coming weeks and into the winter as a number of both bullish and bearish factors will alternate to influence market sentiment and prices.

Record exports of US liquefied natural gas (LNG) will benchmark US natural gas price at Henry Hub, while an uptick in COVID cases in many parts of the United States and Europe could slow gas demand if economies also slow amid newly imposed restrictions and incarcerations.

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 up as the tight European gas market will tighten even more, impacting prices elsewhere, especially in Asia. If the winter in Asia is also colder than usual, high prices are on the way, driving additional LNG exports from the US due to lower Henry Hub prices compared to benchmarks in Europe and Asia. Continued high US LNG exports are in turn constricting the US market and driving the US natural gas benchmark higher.

US LNG exports have reached near record levels in recent weeks amid record shipments to China in recent months.

After a year without LNG shipments from the US to China between March 2019 and February 2020, due to the trade war, US exports to China started to increase towards the end of last year, reaching an all-time high in August 2021. Show EIA data.

So far, the volume of gas supply to US LNG export facilities in November was higher than in October and near the monthly record set in April 2021, according to data from Refinitiv cited by Reuters. So far, gas volumes flowing to US export plants averaged 11.1 Bcf/d in November, up from 10.5 Bcf/d last month and slightly below the monthly record of 11.5 Bcf/d in April.

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On Friday, November 19, the amount of gas flowing into US LNG export facilities was estimated based on: Refinitive to have reached a historic record of 12.03 Bcf/d, up from the previous record of 11.99 Bcf/d at the end of March 2021.

Thanks to near-record exports, U.S. natural gas futures rose 6 percent in the week to Nov. 19, after falling 13 percent the previous week, according to Reuters estimates.

On Monday 21 Nov. Prices opened lower and traded below $5 per million British thermal units (MMBtu), after paying above $5 on Friday.

According to Satendra Singh . from investing.com, this week’s decisive point for the immediate direction of Henry Hub prices would be the $5.562/MMBtu level, with a sustainable move above that level this week, indicating a bullish trend and a sustainable move below that, indicating on possible sale.

Colder weather this week should support prices as US domestic demand for natural gas is estimated at NatGasWeather.com hovering between moderate and high early this week as a cold weather system with rain and snow trails across the Great Lakes and east.

US natural gas prices averaged $5.51/MMBtu in October and will average $5.53/MMBtu from November to February. said in its latest Short-Term Energy Outlook (STEO). Prices have been high in recent months due to inventories below the five-year average.

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

“We predict that US inventories will be similar to the five-year average this winter, and we expect that factor, along with rising US natural gas exports and relatively flat production through March, to keep US natural gas prices close to recent levels before moving to highs. go down. pressure on prices,” the US government said.

There will be downward price pressures next year as high prices now provide an incentive for more production, but throughout this winter — especially when it’s colder than usual from the Americas to Europe and Asia — natural gas prices have room to climb further.

By Tsvetana Paraskova for Oilprice.com

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