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Natural Gas Flirts With $8 As Sweltering Americans Crank Up The Air-Con

By Barani Krishnan/Investing.comCommoditiesJul 21, 2022 04:29AM ET
www.investing.com/analysis/natural-gas-flirts-with-8-as-sweltering-americans-crank-up-the-aircon-200627420
Natural Gas Flirts With $8 As Sweltering Americans Crank Up The Air-Con
By Barani Krishnan/Investing.com   |  Jul 21, 2022 04:29AM ET
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  • Henry Hub’s most-active gas contract up 40% from 3 weeks ago
  • Despite outsized demand, gas-in-storage likely rose due to idled Freeport LNG plant
  • Focus on US heatwave keeping prices up amid Freeport crisis 

From California to New Hampshire and Texas to Oklahoma, a heat wave is searing across at least 28 of the lower United States, turning the natural gas market on its head as domestic cooling demand and Europe’s growing LNG needs push the fuel’s prices up 40% in just three weeks.

From the mid-$5 pricing of late June, the most-active gas futures contract on New York’s Henry Hub breached in the past 24 hours the closely-watched $8 level. 

At the time of writing, during Asia’s market hours on Thursday, the August gas contract was back in $7 territory. 

But it was well within range of returning to $8 during Thursday’s daytime trade in New York—especially if the weekly gas-in-storage number from the US Energy Information Administration turns out to be smaller than forecast, adding to the market’s bullish fervor.

Analysts said the mood on the gas market has decidedly shifted—from one of uncertainty just weeks ago due to the sudden idling of Freeport LNG, the country’s main liquefied natural gas plant, after an explosion there—to one where life-threatening temperatures were forcing many Americans to keep their air-conditioners running 24/7 and cranked to the max.

Power use in Texas—America’s hottest state in any summer—is expected to break records again this week from air-conditioning overruns, said the state’s power grid operator which largely runs on gas. 

Natural Gas Power Demand
Natural Gas Power Demand

Source: Gelber & Associates

Reuters-enabled data provider Refinitiv said there were around 93 cooling degree days (CDDs) last week, which was more than the 30-year normal of 87 CDDs for the period.

CDDs, used to estimate demand to cool homes and businesses, measure the number of degrees a day's average temperature is above 65 degrees Fahrenheit (18 C).

The fundamentals of supply-demand aside, near-term chart signals for Henry Hub’s August gas were skewed to the upside, technical analysts said.

Sunil Kumar Dixit, chief strategist at skcharting.com, said a retest of June’s $9.66 high could not be ruled out, adding:

“Some profit booking from retail traders who initiated the long positions on in the past 24 hours can unwind the momentum and push prices down to $7.50 and $7.20,”

“But the greater possibility is an extension of the upside to $8.30 first, then $8.60 and later $9.”

Houston-based gas markets consultancy Gelber & Associates said the market’s focus was almost entirely on the heat wave—something that would play to the advantage of market longs from a demand perspective.

It added: 

“Looking ahead, next week is expected to be the hottest of the season until temperatures are projected to cool in the beginning of August. Both European and American weather models are running extremely hot with American models running slightly hotter. This intense heat wave is likely to temper storage injections.”

Natural Gas Storage
Natural Gas Storage

Source: Gelber & Associates

Ahead of the weekly update on gas storage, the consensus by analysts tracked by Investing.com is that there was a likely addition of 47 billion cubic feet (bcf) during the week ended July 15.

That would compare with the 50 bcf during the same week a year ago and the five-year (2017-2021) average injection of 41 bcf.

In the prior week, utilities added 58 bcf of gas to storage.

If the analysts tracked by Investing.com are accurate in their call, the injection for the week ended July 15 would lift gas-in-storage to 2.416 trillion cubic feet—about 11.5% below the five-year average and 9.5% below the same week a year ago.

How gas-in-storage develops over the next couple of months remains a challenge to traders with the Freeport LNG plant expected to return to production only in October.

Freeport used to account for around 20% of all US liquefied natural gas processing, consuming up to 2.1 bcf of natural gas per day. That was before the June 8 explosion that rendered it inoperable. Gas unused by the plant has been piling since, sending the Henry Hub’s front-month crashing from last month’s 14-year high of $9.66 to a 14-week low of $5.32 by the end of June.

European demand for US LNG is only expected to grow in the meantime, amid worries that Russia may further scale back gas flows to the continent via the Nord Stream 1 (NS1) pipeline. Flows on the conduit have been reduced to zero since last week amid annual repair work.

The planned maintenance is slated to end Thursday, but Russian President Vladimir Putin told reporters while visiting Iran on Tuesday that if Kremlin-backed Gazprom PJSC (MCX:GAZP) does not receive a needed turbine from Canada, NS1 would likely resume flows at just 20% of capacity.

Putin said Western sanctions imposed against Russia after its invasion of Ukraine prevented the return of the turbine from Canada, where it had been sent for repairs. European officials have warned that Putin may use the turbine issue as the pretext for protracted natural gas cuts to Europe to punish the continent for opposing the war.

The European Commission on Wednesday unveiled a plan to cut natural gas consumption by 15% until next spring in anticipation of Russia curbing supplies over the long-term.

“Russia is blackmailing us,” the commission’s president Ursula von der Leyen told reporters Wednesday.

“Russia is using energy as a weapon.”

Industry news portal naturalgasintel.com noted that despite the Freeport outage, feed gas volumes at US LNG facilities have held above 11 bcf/d most of July. 

It added:

“That puts export levels near capacity … as countries across Europe are clamoring for US LNG to help fill the void.”

Disclaimer: Barani Krishnan uses a range of views outside his own to bring diversity to his analysis of any market. For neutrality, he sometimes presents contrarian views and market variables. He does not hold positions in the commodities and securities he writes about.

 
 
Natural Gas Flirts With $8 As Sweltering Americans Crank Up The Air-Con
 

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Natural Gas Flirts With $8 As Sweltering Americans Crank Up The Air-Con

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Comments (9)
Roman banjara
Roman banjara Jul 23, 2022 12:27AM ET
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What about copper sir, is it bottom out or will it be for new low?
Barani Krishnan
Barani Krishnan Jul 21, 2022 10:47AM ET
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Whoa, the EIA reports a 32 bcf injection, some 15 bcf below forecast. Profit-taking at the highs aside, there could be serious support for $8.
Roman banjara
Roman banjara Jul 21, 2022 10:47AM ET
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What about copper sir, is it bottom out or will it be for new love?
Roman banjara
Roman banjara Jul 21, 2022 10:47AM ET
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What about copper sir, is it bottom out or will it be for new low?
Barani Krishnan
Barani Krishnan Jul 21, 2022 10:47AM ET
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Roman banjara  I will write something on copper soon. Thanks for asking.
Son Yay
Son Yay Jul 21, 2022 10:35AM ET
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Drumpfski Tankies talking about reality? LoL what a laugh
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Trumpster Rocks
Trumpster Rocks Jul 21, 2022 10:35AM ET
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Seems like Barani had a few comments deleted couldn't take the truth even though it was written without the typical liberal tagging and racial divide.. Typical of libs.. Nothing to contribute so they just lie lie and accuse the other side of what they are doing. And why not? They own 99% of the media.. They treat the masses like the 3rd world country they are trying to turn America into instead of just leaving like the promise too. But never do!
Barani Krishnan
Barani Krishnan Jul 21, 2022 10:35AM ET
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Trumpster Rocks  Ha ha ha ... you're really Looney Tunes, aren't you? Harlow, I have enough to do in a day than spending time deleting your comments, which I really appreciate for their comical value. Go have a beer and chill.
Trumpster Rocks
Trumpster Rocks Jul 21, 2022 10:35AM ET
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Barani Krishnan  Then why did you?  And just what climate change Emergency is there a little heat as usual in Texas this summer? I'm rolling of the utter stu__y of the left thinking not only that the masses will believe this utter nonsense  but actually care about it when they are hurting and starving and can't afford to feed their children or family because of this empty suit being directed to do all these ____ things that he is doing to the people of this once great country.
Trumpster Rocks
Trumpster Rocks Jul 21, 2022 10:35AM ET
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Barani Krishnan I'm through talking to a liberal is like talking to a wall neither one are going to answer you because neither have anything to give to the conversation. I'm going to get that Long island ice tea now...Let's go Brandon!
Barani Krishnan
Barani Krishnan Jul 21, 2022 10:35AM ET
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Trumpster Rocks  Honest to goodness, did you write that earlier? For the life of me, I didn't read that entry of yours, so how could I have even deleted it? I can only guess that the admin were clearing the stuff of spammers selling stocks and crypto advice and probably deleted your comment unintentionally. Just for you to know: I don't delete anything. The administrators do. I'm only a writer here, not site supervisor. The only comment of yours that remember is you saying you wanted a strong Trump comeback, which gave me the morning laugh I much needed. From this exchange, it appears there's only one person who's b...(fill in the blanks)-hurt here. YOU! LOL
Trumpster Rocks
Trumpster Rocks Jul 21, 2022 9:29AM ET
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Why are the probabilities on these wrtie ups always to the lib's view of what they want the world to come off as instead of Reality?
Barani Krishnan
Barani Krishnan Jul 21, 2022 9:29AM ET
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From what I notice, there is enough right-wing overload in the comments fields.
David Willey
David Willey Jul 21, 2022 9:29AM ET
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Written like a Trumpster.
Barani Krishnan
Barani Krishnan Jul 21, 2022 9:29AM ET
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David Willey  Thanks for noticing :)
Trumpster Rocks
Trumpster Rocks Jul 21, 2022 9:29AM ET
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David Willey I'm sure Joe and Hunter would agree with both of you. If you need a link to the latest let me know? Or just tune into America's Most Trusted News In America by far. The Numbers don't lie! Barani why don't you take a survey on your trust-ability? I 'm sure that would be about as hilarious as Joe shaking hands with Casper not once but Twice now on video press conference and telling everybody he is Jill's husband or the Msnbc reporter changing the chant to Let's go Brandon ....and we all know what the Crowd really said even though the paid for media like yourself didn't report it correctly...aha ha ha pathetic. Good Day as Paul Harvey a Real broadcaster would say.
Trumpster Rocks
Trumpster Rocks Jul 21, 2022 9:26AM ET
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This is nothing new high temps in the summer time... but I'ot stick and chief is worried about climate change instead of the people..agenda always and only with this id'ot
Barani Krishnan
Barani Krishnan Jul 21, 2022 9:26AM ET
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Climate change affects "the people".
Trumpster Rocks
Trumpster Rocks Jul 21, 2022 9:26AM ET
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Barani Krishnan And just what climate change Emergency is there a little heat as usual in Texas this summer? I'm rolling of the utter stu-idty of the left thinking not only that the masses will believe this utter nonsense  but actually care about it when they are hurting and starving and can't afford to feed their children or family because of this empty suit being directed to do all these moronic things that he is doing to the people of this once great country.
Trumpster Rocks
Trumpster Rocks Jul 21, 2022 9:24AM ET
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Why is it that only left wing comments are allowed on this site? Trump needs to come back strong!
Barani Krishnan
Barani Krishnan Jul 21, 2022 9:24AM ET
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Based on everything he had done so far, I can think of a more appropriate place for him to spend the rest of his days. And that certainly isn't the White House.
Trumpster Rocks
Trumpster Rocks Jul 21, 2022 9:24AM ET
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Barani Krishnan Based on what making the Best Economy ever and now with your boy Joe ruining America on a Daily basis you are worried about the Real President Trump instead of the Empty vessel being whispered to by Ovommit? Sorry Obama? you are a left tool at best and your write ups prove it on a daily basis. No Shame or Truth just Bias paid promo's Congrats on your money pot . Hugo loves you!
Barani Krishnan
Barani Krishnan Jul 21, 2022 9:24AM ET
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Trumpster Rocks Go, get a life! LOL
Trumpster Rocks
Trumpster Rocks Jul 21, 2022 9:24AM ET
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Barani Krishnan at least I have an honest one ... How's your boy Joe and Hunter doing these days? Just like you i assume laughing all the way to the bank at others expense. Congrats ! But in the end you still have to answer to God Almighty! Gl on that day. You won't be laughing then ....
Barani Krishnan
Barani Krishnan Jul 21, 2022 9:24AM ET
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You seriously need therapy. LOL
Trumpster Rocks
Trumpster Rocks Jul 21, 2022 9:23AM ET
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Another 1st amendment Squashed by https://investing.com geez can't post an honest comment if it is in the least bit not complimentary to the Ovvommitt side of the discussion
Barani Krishnan
Barani Krishnan Jul 21, 2022 9:23AM ET
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Hey, we don't delete comments for their political bias. We only do that when comments breach our guidelines on language.
david jamali
david jamali Jul 21, 2022 8:25AM ET
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👌🏼
Christian Boulais
ChristianB Jul 21, 2022 7:49AM ET
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As usual, great and useful job M. Barani  Khrishnan.  My not humble opinion... The quote of the EC shows again that globalists are incredibly in a full delirium, imposing sanctions to Russia (playing against themselves! And helping Russia!!) and then after, accusing Russians  to use energy as a weapon... This war had never happen if the Minsk agreements had been applied: Russia intervene to stop a 8 years old war from the US puppets in Kiev (installed in the coup d'Etat of 2014)  against the Donbass and to avoid a new 1914, this time with nuclear weapons, which is the meaning of NATO at the Russian border...  Energy prices will stay high, undoubtly.  European an Ukrainian people pay an heavy price, because the true history is that US globalists want to make to Russia what they did to Yugoslavia,  because they  will never accept that Russia and Europe cooperates together.  But with the reinforcement of the BRICS,   a new world order of cooperation and peace is possible!!
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Steve Breitenfeldt
Steve Breitenfeldt Jul 21, 2022 7:49AM ET
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" New world order of cooperation and peace"?  mYThat means "at the end wrong end of a Russian gun barrel"  Didn't Russia butcher 30-40 million of it's own citizens under the premise of " new world order of cooperation and peace"
Barani Krishnan
Barani Krishnan Jul 21, 2022 7:49AM ET
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Steve Breitenfeldt  Putin plays the "victim".
Barani Krishnan
Barani Krishnan Jul 21, 2022 7:49AM ET
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Christian B, thanks for the compliment on the story. There is certainly a lot going on here. my views on Ukraine are different though. Bests.
Mark Westland
Mark Westland Jul 21, 2022 7:49AM ET
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Peace with bric? Are you kidding me. These governments subvert their people. They dominate them with military rule. They use there people for their own personal gains.They have little interest in the people of their country. They only care about ****** I agree the U.S has flaws, but saying brics will bring peace is like saying Kim Jong Un is a liberal. Then again his country, Syria, Iran, Cuba, Venezuela side with brics.Your statement is almost laughable.
SunilKumar Dixit
SunilKumarDixit Jul 21, 2022 7:49AM ET
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Energy prices are on high side, higher than people can afford, things need to stabilize lest it gets worse.
 
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