Major Losses for U.S. Natural Gas Market in Middle East Conflict Shift

Quick overview

Natural gas is down 5.45% in the United States for Wednesday after the United States and Iran came to an agreement to cease hostilities for the next two weeks.

A cold snap in the northern United States was not enough to keep LNG futures from dropping on Wednesday. The decline of more than 5% was caused primarily by the Middle East ceasefire which occurred just before President Donald Trump’s 8pm deadline.

All gains from the previous session have been wiped out, and natural gas futures are now down to $2.71/MMBtu. That puts the price at its lowest point in 17 months. Despite cold weather sweeping much of the northern U.S. mild weather forecasts have been released and are bringing the rate of natural gas down as well.

Why LNG Rates Should Settle Higher Soon

The forecasts of warm temperatures and the Middle East ceasefire have exerted enormous pressure on LNG prices in the United States. The peace in Iran has had the biggest impact, but the last-minute change in the situation was partially unexpected. The ceasefire could be broken at any time, dramatically changing the fragile peace that involves Iran, the United States, and Israel and affects primarily Middle Eastern countries but also nations around the globe.

With the Strait of Hormuz opening again, gas and oil levels around the world are likely to normalize in the coming days. Much needed supplies will be provided and low inventory levels will be restocked as production resumes. We anticipate this increase to be slow at first and to build up tremendously by next week.  

Now that the ceasefire is in place, prices should start to settle. With no new dramatic happenings in Iran that could directly impact the oil market, the price of gasoline, crude oil, and natural gas should start to go back to where they were about five weeks ago before the fighting began.

Brent crude oil fell 15% Wednesday while West Texas Intermediate futures lost more than 15% as well. These dramatic shifts should stabilize quickly as things settle down in Iran, but the prices are volatile for now. However, the price of crude oil internationally has only a minimal impact on the U.S. LNG futures. That is evident by the vast disparity between crude oil and U.S. LNG in price drops today. It is primarily for that reason that we expect LNG prices to stabilize much faster than crude oil prices and for the LNG futures market in the United States to climb slightly higher soon.

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Timothy St. John

Financial Writer - European & US Desks

Timothy St John is a seasoned financial analyst and writer, catering to the dynamic landscapes of the US and European markets. Boasting over a decade of extensive freelance writing experience, he has made significant contributions to reputable platforms such as Yahoo!Finance, business.com: Expert Business Advice, Tips, and Resources - Business.com, and numerous others. Timothy's expertise lies in in-depth research and comprehensive coverage of stock and cryptocurrency movements, coupled with a keen understanding of the economic factors influencing currency dynamics. Timothy majored in English at East Tennessee State University, and you can find him on LinkedIn.

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