$3 Battleground for Natural Gas Futures
Natural gas futures rose on Thursday after a sharp decline on Wednesday amid Middle East conflict that has endangered the LNG supply.
Quick overview
- Natural gas futures are nearing $3 per MMBtu amid market volatility caused by the Iran-U.S. conflict.
- LNG prices are fluctuating due to uncertainty over global gas supply and tensions in the Middle East.
- Iran's threats to disrupt shipping in the Strait of Hormuz have led to instability in gas and oil markets.
- The upcoming EIA report is expected to show a decrease in gas inventories, which could further influence prices.
On Thursday, natural gas futures closed in on $3 per MMBtu again after losing ground on Wednesday while the Iran-U.S. conflict caused market volatility.
LNG prices are erratic this week thanks to ongoing conflict in the Middle East and uncertainty over the global gas supply. About 20% of the LNG market is tied to Iran and its nearby waterways, and those trade routes have become the subject of fierce debate this week.
Iran’s government says it will destroy ships passing through the crucial Strait of Hormuz, but the U.S. government has promised to protect ships in the region. The back and forth has caused the gas and oil market to become unstable and kept the price of natural gas futures in the United States close to the $3 mark.
Gas Futures Recovering from Sharp Downturn
On Wednesday, the price of natural gas fell 4.5% when Iran talked about bringing the fighting to a close. But an announcement out of Tehran said that the earlier claim was a fake one. This has caused the price of gas futures to oscillate, with prices rising 3.83% on Thursday morning.
President Donald Trump promised to provide naval escorts to ships passing through the Strait of Hormuz and other waterways nearby that could be subject to attacks. Gas production at the Qatar LNG facility has been stopped for now, and this facility is the largest in the country.
The latest EIA report on gas inventories is expected soon, and the prediction is that inventory levels have dropped since last week. Overall gas production has diminished since fighting started in the Middle East, but production across the United States remains at normal levels. Cold weather across the northern United States has accounted for much of the recent LNG use, but that activity is expected to taper off as warm weather sets in soon.
The upcoming EIA storage report should show a withdrawal of 124 Bcf, and if so, that could boost gas prices further, pushing them past $3. Heating demand is also expected to decrease with warm weather, and forecasts are calling for rising spring temperatures this week and next. Supply fears are likely to persist but may not affect the United States very much.
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