Natural Gas Futures Almost Doubled

Significantly, Natural gas futures have almost doubled from the lows they reached in June, an impressive turnaround for a commodity that has essentially been regarded as oil’s less popular peer over the past few years.

On Monday, October 12, Natural gas closed at $2.88 per million British thermals. The commodity was up 5.1% on the day and at a new 52-week high. During the day, natural gas increased by $2.95, coming just short of two-year high. Moreover, the stock of gas producers increased dramatically too. For example, EQT increased by 5%, while Cabot Oil & Gas boosted 3%.

Remarkably, Before October 12, natural gas increased for three weeks in a row and boosted 34% over that span. Moreover, Since November 2018, It was the most extensive three-week gain for the commodity. The rally has been increasing for a while.

The increase comes as oil has stayed in a holding pattern fluctuating between the high $30 range per barrel and the mid $40s during the past three months.  On Monday, Brent crude futures dropped by 2.6%. They settled at $41.72 as investors responded to signs that supply is outpacing demand.

Production has come back online in some regions

Significantly, production has come back online in some regions. For example, Libya is restarting production at its largest oil field. Moreover, a strike in Norway is over, and U.S. production continued in the Gulf of Mexico after hurricane-related shutdowns.

According to the director of energy futures at Mizuho Securities USA, approximately 2 million barrels of cure oil came back online or will come back online in the following days.

However, the picture is complex for natural gas. Gas prices have been subdued for years because there is a fuel oversupply, but the dynamics are different. The result has been a decline in U.S. gas production.

Shale-oil production produces natural gas, too, so the growth in oil drilling in the U.S. has also led to more output. However, the Coronavirus pandemic has severed demand for products refined from crude, such as gasoline and jet fuel, so oil producers have sharply decreased their activity.

As winter is coming, natural gas tends to trade based on whether it’s likely to be cold, forcing people to use more gas for heating. It also trades based on how much gas is being utilized for electricity. Businesses have shifted to gas from coal, which has provided another tailwind to gas prices. According to analysts, natural gas will be up and running faster than expected.