FX.co ★ Upbeat outlook: US natural gas ready to take off

The cost of natural gas steadily increases. Optimism about this energy carrier will continue for more than one month due to several factors. The fall in LNG production and the inevitable rise in seasonal demand for it in the US indicate a natural rise in quotes. The expected recovery of the European and Asian markets, whose share in the destination for liquefied natural gas from the US cannot be overestimated, also plays an important role in this regard. The winter months in the US will be characterized by an increase in natural gas prices of more than $3 per MMBtu as announced by the US Department of Energy.

Last week's gas price fluctuations are explained by what is known in narrow circles as the "shoulder season". In other words, this is a period when the demand for electricity for air conditioners used in the summer inevitably falls, and the demand for gas for heating in the cold period has not yet come. For this reason, quotes only depended on storage capacity, raging storms, and other factors.

October natural gas futures were trading at $2.856 per MMBtu on Thursday, while January futures were trading at $3.44 per MMBtu. It is worth noting that futures for delivery from December to March were trading above $3.20 per MMBtu, which is understandable due to increased demand for gas in the winter in the US, Europe, and Northern regions of Asia.

The demand for gas is projected to be high, which is disproportionate to the supply of this energy carrier in the US. Today, there is a much lower supply than a year ago. The reason lies mainly in the low prices of "black gold", which in turn led to a decline in oil production. The low level of oil energy production determined the decline in gas production in the Permian Basin.

Liquefied natural gas spot prices in Asia are experiencing strong increases for the first time in many months. This indicator determines the attractiveness of its exports from the US.

Note that from January to July, exports of American liquefied natural gas suffered significant losses. It was only in August that exports began to grow. According to the US Department of Energy, in August, natural gas exports were 19% higher than in July.

Moreover, according to the forecasts of the DOE, low natural gas production will trigger a sharp increase in the average price of natural gas at Henry Hub in January against the background of strengthening domestic and external demand. It is expected to rise to $3.40 per MMBtu. Analysts say that the specified cost level will not be lower than $3.00 per MMBtu throughout 2021.