The Natural Gas Boom: What do Market Experts say about it
- 20-Apr-2022 2:44 PM
- Journalist: Peter Schmidt
Russia's aggressive invasion of Ukraine has aggravated global energy markets and geopolitics, propelling oil and Natural gas prices to record highs in almost ten years. As Russia is the world's largest exporter of oil to global markets, according to the International Energy Agency (IEA), its Natural gas plays a critical role in driving the European economy. The United States, the European Union, and others have imposed economic penalties on Russia, and plans have been announced to get unaccustomed to the country's fossil fuels. However, despite Russia's continuous bombing of Ukraine, its oil and gas continue to flow to Western countries that have criticized the incursion.
The prices of Natural gas have risen sharply in recent weeks, and market experts are wagering that the trend is not likely to end anytime soon. Gas futures and producer stocks have gained a lot of traction as a result of the ongoing situation. Natural gas futures in the United States gained for the fifth week in a row last week, rising 96 percent year to date and reaching their highest settlement since October 2008. The last week's increase in Natural Gas prices was fueled by a late-season blast of chilly weather that hit the United States.
As Europe desperately tries to replace Russian gas, the United States is acquiring a new role as the world's leading liquefied natural gas (LNG) producer. The biggest reason, however, for the Natural gas price surge is that foreign countries are signing large deals to import U.S.-produced gas in the form of LNG. Europe wants American gas so that countries there can pivot away from the Russian gas supplies. With U.S. exporters set to meet with customers in Berlin this coming week, additional demand-related news is expected to come forth from the likes of Cheniere Energy and Tellurian Inc.
According to the U.S. administration, the issue of a stable market is most visible in prices for LNG, as they have fluctuated wildly in the last six months. This has been especially true in the European region since the beginning of Q1 2022, as the gas futures have hit 20 times their U.S. price in the second half of the first quarter.
When the prices of Natural Gas began to rise last year, later-month futures usually lagged behind, based on the belief that gas prices would eventually return to their previous levels. Natural gas futures closing prices averaged $3.30 between 2009 and 2021, which stayed within a narrow range. Simply put, there was too much supply and not enough demand.