U.S. natural gas prices rose to their highest levels in more than 13 years as strong demand tested the ability of U.S. drillers to expand supply. In early Asian trade, U.S. natural gas futures rose to $7.55/MMBtu, surpassing a short-term rally fueled by a short squeeze in January and about doubling from the beginning of the year.
The global fuel shortage is affecting the entire market, and suppliers are struggling to cope with the post-pandemic surge in consumer demand, a situation further exacerbated by the Russian-Ukrainian war. Although U.S. natural gas prices are still well below Europe and Asia due to the massive development of shale fields last year, U.S. natural gas discounts have been narrowing relative to Europe and Asia.
U.S. underground natural gas backup inventories were lower than normal for the same period in previous years, and production also remained flat. At the same time, the United States is exporting LNG to help Europe reduce its dependence on Russia for energy supplies.
Parts of the northern U.S. will experience below-normal temperatures from April 25 to May 1, according to the National Oceanic and Atmospheric Administration. That could increase demand for fuel for heating and power plants, which would result in a diversion of natural gas used to replenish inventories, which is typically used for storage at this time of year.
A shortage of U.S. coal has also fueled a rise in natural gas prices, limiting the ability of power generators to switch fuels as demand soars and prices rise.
The U.S. Energy Information Administration said last week that natural gas inventories in salt caverns and depleted aquifers rose by 15 billion cubic feet in the week to April 8, less than half the average increase for the same period over the past five years; U.S. natural gas inventories remain below normal levels 18%.
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