Chevron strike, EIA report spur natural gas price surge

U.S. natural gas futures experienced a slight recovery on Friday, approaching the $2.6 per million British thermal units (MMBtu) mark after hitting a one-month low of $2.5/MMBtu. This rebound — the price of U.S. natural gas has grown by close to 1.5% over the past 24 hours — comes as the market assessed signs of decreased supply amid subdued demand.

The commodity was down 5% for the week following steep declines after Labor Day Weekend.

“Natural gas prices were sharply lower on the week to $2.50 yesterday morning, then rallied sharply, aided by a bullish [weekly storage] build of only +33 billion cubic feet,” said NatGasWeather in a note cited by the Wall Street Journal.

“Next week’s EIA report will be of great interest to see if yesterday’s anemic build was due to a tighter balance or a one off reading due to very light wind energy generation. We believe it’s the latter and will show up when next week’s EIA report prints looser.”

According to newly released data from the U.S. Energy Information Administration (EIA), natural gas inventories in the United States increased by 33 billion cubic feet (Bcf), falling short of the anticipated 43 Bcf build and remaining well below the averages observed at the end of the second quarter. However, the rebound was limited by expectations of reduced demand.

The prospect of cooler seasonal weather has led to a decrease in the outlook for air conditioning usage and short-term gas consumption. Nonetheless, meteorologists are still predicting that temperatures will generally stay above normal levels until mid-September. Additionally, diminished operations at domestic LNG export facilities in the U.S., such as Cheniere Energy's Sabine Pass and Corpus Christi terminals, have hindered a more substantial reduction in national gas supply.

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EU natural gas prices up on news of Chevron strike in Australia

Labor strikes in Australia have caused an uptick in natural gas prices in Europe, underscoring the region's vulnerability as it faces a second winter without a steady supply of Russian fuel.

On Friday, employees at two major natural gas facilities operated by Chevron in Australia began industrial action, escalating an ongoing dispute that has had a significant impact on global gas markets. These plants are responsible for approximately 7% of the worldwide liquefied natural gas (LNG) output.

As a result of these developments, gas prices in Europe surged by nearly 10%, reaching approximately 36 euros per megawatt-hour, which is roughly equivalent to $38.50. Europe heavily relies on LNG shipments to fuel its industries, generate electricity, and heat homes, especially since Russia has significantly reduced gas supplies following the invasion of Ukraine.

However, analysts do not anticipate the extreme gas price fluctuations that disrupted European industries last year. This is mainly due to the substantial reserves that the continent has stockpiled in preparation for the winter season — natural gas reserves are approximately 93% full, surpassing the EU’s objective of achieving such storage levels by November 1st.

Natural gas price forecast: Projections point to Henry Hub and Dutch TTF rising in 2024

The U.S. Energy Information Administration’s most recent short-term energy outlook listed a natural gas price forecast of $2.58/MMBtu in 2023. According to the agency, natural gas prices at Henry Hub — a benchmark rate based on the distribution hub on the natural gas pipeline system in Erath, Louisiana — will increase to a potential average of $3.22 in 2024.

The EIA’s natural gas forecasts are set to be updated on September 12.

According to figures from economics data aggregator TradingEconomics, EU natural gas is projected to trade at a potential price of 35.79 EUR/MWh (megawatt-hour) by the end of this quarter. The platform’s 12-month forecast saw the commodity trading at $46.17 by September 2024.

When considering natural gas futures for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.