US natural gas prices change as export outlook changes

U.S. natural gas prices spiked on Tuesday, their highest levels last traded during the historic commodity price boom in 2008, before diverging on news that a major fuel exporter will be closed longer than expected.

The price moves are reminders of the gas market’s notorious volatility. Even after the last drop, prices are still at a bottom touch before shale drilling ushers in a decade of ample supply.

The shale bounty led to the construction of coastal docks to export liquefied natural gas, reversing plans to import LNG made when US prices were higher.

The importance of overseas demand was evident on Tuesday when Freeport LNG delayed plans to restart its export terminal in Texas from October to November. The terminal, which accounts for about a fifth of total U.S. LNG export capacity, has been closed since it was damaged by an explosion in June.

The delay suggests that some gas shipments will be temporarily stuck in the US. US gas prices fell 6.5% to $9.05 per million British thermal units.

Prior to that, the benchmark rose as much as 3.6%, surpassing $10/million Btu for the first time since 2008, as utilities, industry and merchants scoured the market for fill. full storage points ahead of the winter heating season, due to concerns about further cuts in Russian supply. into Europe.

The price of gasoline in Europe is higher than in the US as fears of severe winter shortages are gripping markets, spreading fears that energy costs will push economies into recession. Prices on the continent on Monday hit an intraday record of €295 a megawatt-hour, or about $79/million Btu, although they fell slightly on Tuesday.

James Huckstepp, an analyst at S&P Global Commodity Insights, said that hot temperatures and low output from wind generators in Europe also contributed to higher prices. “The recent hot, dry and relatively calm weather is also bullish,” he said.

In the United States, a series of heatwaves this summer sent demand from gas-fired power plants to a record high as power plants ramped up output to meet demand for air conditioning, the agency said. Energy Information speak on Tuesday.

$/million Btu line chart shows US natural gas prices hitting peak of pre-shale boom

High international gas prices have also kept US export terminals operating at full capacity this year as traders seize the arbitrage opportunity by shipping gas overseas. Freeport said the startup will initially produce LNG at below full capacity, and it does not currently expect to reach full output again until March 2023.

Prices have encouraged more drilling, but US gas production has not kept up with demand. As of mid-August, domestic gas reserves stood at 2,519 cubic tons, about 13% below average.

Most of this year’s US LNG cargo has been shipped to Europe, where US President Joe Biden has supply supplies to help offset sanctions-related losses against Russia during the war in Ukraine.

However, competition for LNG is expected to intensify as buyers from South Korea, Japan and China begin looking to secure supplies before winter.

Gas prices in the UK have been slightly lower than in Europe for most of the summer due to the country’s ability to import excess LNG, allowing it to bring LNG in and send it to Europe via pipeline to help them. fill storage locations.

However, the benchmark UK gas price is around $61/million Btu, similar to the Asian market offer for spot goods this week.

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