Natural gas rises to highest level since 2008 as war in Russia flips energy markets

Liquefied natural gas (LNG) storage silo at an LNG terminal operated by LNG Croatia LLC in Krk, Croatia on Monday, January 25, 2021.

Petar Santini | Bloomberg | Getty Images

U.S. natural gas prices rose on Monday to their highest level in more than 13 years as Russia’s war with Ukraine triggers a global energy crisis and forecasts call for cooler spring temperatures.

Futures jumped more than 6% to trade at $7.80 per million Btu, the highest since October 2008. The jump is based on the recent rally, with natural gas rising positively for five straight weeks.

“Given the sustained bullish momentum and the ill-prepared market for further bullish shocks, a notable further rise in natural gas prices remains likely this summer,” EBW Analytics notes. The firm added that the “bullish weather shift” has resulted in “overloading” the US market.

For the year, natural gas prices in the US rose by 102%, which increases fears about inflation in the economy. The move is less extreme than in Europe, where natural gas futures have surged to record levels as the bloc struggles to move away from dependence on Russian energy.

The US is currently shipping record volumes of liquefied natural gas to Europe, pushing up the price of the Henry Hub.

“LNG exports have become more geopolitically significant, and demand from both power generation and industrial use is strong. The role of the United States as an exporter continues to grow,” RBC notes.

Against the backdrop of a jump in prices, producers keep output under control, and stocks in storage are below the average for 5 years, RBC reports.

“There is a fundamentally constructive backdrop driven by record LNG outflows, strong Mexican exports and producer discipline,” the company added.

However, not everyone believes that the rally will continue. Citi has raised its Henry Hub 2022 base case price target by 40 cents to $4.60 per million Btu, well below the current contract price.

“[A] A combination of factors could boost demand and slow production growth, but the market could overestimate their impact due to a sharp rise in prices,” the company said.

Shares of natural gas producers EQT Corp. and Coterra Energy hit 52-week highs in early Monday trading, up more than 4%. Range Resources traded over 3% higher.

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