US natural gas prices surged to a 13-year high as robust demand tests drillers’ ability to expand supplies.
Futures rose as much as 4.8% to $7.652 per million British thermal units on Monday in New York, topping January’s short squeeze rally and roughly double levels from the start of the year.
The last time prices were this high was 2008, when hurricanes menaced offshore gas platforms in the Gulf of Mexico and searing summer weather stoked demand for power to run air conditioners. Back then, prices only began to drop when the broader economic outlook turned dark ahead of the historic worldwide financial crisis.
This year’s gas raly has been driven by a global fuel crunch that’s rippling across markets as suppliers struggle to meet a post-pandemic surge in consumption, further exacerbated by Russia’s war in Ukraine. While U.S. gas prices have remained well below rates in Europe and Asia thanks to a bounty of shale fields, that discount has been shrinking.
Backup inventories held in underground caverns and aquifers are below normal for this time of year and production is holding flat. Meanwhile, the U.S. is exporting every molecule of liquefied natural gas possible to help Europe reduce its reliance on Russian energy supplies.
Below-normal temperatures are forecast across parts of the northern U.S. from April 25 to May 1, according to the National Oceanic and Atmospheric Administration. That could increase demand for the heating and power-plant fuel, diverting supply that normally goes to storage during this time of year. A shortage of coal in the U.S. has also helped fuel the gas rally, limiting power generators’ ability to switch fuels.
Front-month futures rose 4.7% to $7.642 per million British thermal units at 9:45 a.m. on the New York Mercantile Exchange, which marks the highest intraday price since October 2008.
Inventories grew by 15 billion cubic feet in the week ended April 8, less then half the average gain for the period over the past five years, the Energy Information Administration said last week. Stockpiles remain almost 18% below usual levels.