In recent months there were surges in oil prices from negative levels to over $70 per barrel. In turn, the prices of CO2 emission allowances seem to have been rising for years. The price of uranium needed to power nuclear power plants has soared in recent weeks and the price of natural gas seems to continue to rise.
CFDs on natural gas are available on the Conotoxia platform under the symbol Nat_gas and this instrument seems to be the hit of the week again, rising by around 7%. It is worth mentioning that the current price increases have been ongoing since mid-March, but in the last three weeks they have accelerated from USD 3.8 to over USD 5 per MMBtu (British thermal unit). Thus, in six months natural gas in the U.S. has become 87 percent more expensive, and since the beginning of 2021 it has become 98 percent more expensive. Thus, it is one of the fastest growing energy resources, which also does not seem to be without significance for the cost inflation observed in the world.
Goldman Sachs analysts do not even exclude the possibility that with the onset of a colder or longer than usual winter, natural gas prices could still double, despite the current almost 100 percent increase. In the U.S., gas has typically been cheap, and prior to the pandemic it cost less than $2 per MMBtu, the cheapest it has been since the late 1990s. It should be noted that in addition to electricity and heating needs, natural gas is an important feedstock and is used in the processing of chemicals, fertilizers, paper and glass, among other things, which is important as part of broader cost inflation.
Prices appear to be driven up by several factors. The drought continues in the western U.S., lowering water levels, making hydroelectric plants inoperable and switching to gas power. Further, unprecedented warm months have fueled demand for air conditioning across the U.S., especially in the Northwest. As a result, less gas was put into storage for the winter months when supplies were typically replenished.
Therefore, if the winter months have lower than normal temperatures, prices could rise more. Temperatures below average would likely trigger prices above $10/mmBtu, Goldman Sachs analysts note. Gas prices were last this high in 2008.
Currently, U.S. industry is also suffering from lower production caused by Hurricane Ida, with 77.3 percent of Gulf of Mexico production still shut in. According to the Energy Information Administration, gas levels in storage in the U.S. are 7.4 percent below the five-year average and 16.8 percent below the same period last year, CNBC reports, which could also affect prices.
Daniel Kostecki, chief analyst at Conotoxia Ltd. (Forex service of Cinkciarz.pl)
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