Sunday, February 5, 2023
HomeGasU.S. Natural Gas Faces High Volatility in 2022


To our FREE newsletter
Get all the latest maritime news delivered straight to your inbox.

U.S. Natural Gas Faces High Volatility in 2022

U.S. natural gas is in for another wild year as the insularity that once shielded North American energy consumers from overseas turmoil disintegrates.

Benchmark American gas futures climbed almost 45% in 2021 for the strongest annual performance in half a decade after a deadly freeze that crippled output was followed by summer heatwaves that lifted demand and hindered efforts to stow away supplies for winter.

As 2022 dawns, traders, explorers and utility operators are facing the prospect of continued volatility amid rising competition from buyers as far away as Poland and the Netherlands who are dealing with a crisis so acute that factories have shut down and Goldman Sachs Group Inc. is warning there’s a “clear risk of running out of gas.”

Overseas buyers purchased 13% of U.S. gas production in December, a seven-fold increase from five years earlier when most of the infrastructure required to ship the fuel out of the country didn’t yet exist. Prior to the advent of the American gas-export business, the U.S.-Canada market was a provincial sphere where prices were dictated by cold snaps in places like Pittsburgh and Chicago, and hurricanes in the Gulf of Mexico. But those days are long gone as brokers in Seoul and Rotterdam shell out record amounts to entice tankers laden with U.S. gas to sail their way.

“We continue to expect more price volatility to be present in these markets relative to recent history, albeit at a more diminished level once exiting the peak demand season of winter weather,” said Natasha Kaneva, head of commodities research and strategy at JPMorgan Chase & Co. “This is particularly true in the U.S., where price volatility has long been absent.”

Volatility in New York-traded gas futures surged to the highest in almost three years in early December as late-autumn concerns that the U.S. was on the verge of its own supply crunch collapsed on the back of milder-than-normal weather and prices tumbled more than 40% from an October peak. Prices also have recently been falling in Europe as the arrival of American cargoes eased fears of an immediate shortage, although buyers in continental Europe still are paying six times as much as U.S. rivals.

Anxiety hasn’t completely evaporated given that the coldest months of winter in the northern hemisphere are still ahead. As recently as Dec. 30, almost 50 tankers carrying American LNG were steering for Europe, with destinations as varied as Gibraltar, Turkey, Croatia and Poland, according to data compiled by Bloomberg. That was a stunning 77% increase from just a week earlier.

2021 “was a banner year’’ for gas, said Paul Phillips, senior strategist at Uplift Energy Strategy in Denver. Despite expectations for continued volatility, last year “will be hard to beat.”

Climate-change concerns are prompting some observers to warn about the potential for increasing summer volatility. “We have definitely seen a warming pattern,’’ said Dennis Kissler, a trader at Bok Financial Securities. “The mid summer months have potential to be very volatile if summer is warmer than normal.”

“We continue to expect more price volatility.” — JPMorgan’s Natasha Kaneva

One foil to another rollercoaster year of volatility would be a significant jump in domestic gas output, analysts said. Bank of America is predicting a 3.5 cubic-foot increase in daily production this year, driven by new wells in shale fields from West Texas to Pennsylvania. U.S. gas production, excluding Alaska, rose about 7% in 2021, more than erasing 2020’s pandemic-related decline, according to BloombergNEF.

Daily output may touch a record 100 billion cubic feet this year, threatening to swamp the market with more gas than it can burn, said John Kilduff, co-founder of Again Capital LLC.

In a “well supplied” market, New York-traded futures would average $3.45 per million British thermal units in 2022 and $3.10 the following year, Bank of America said in a note to clients. Those compares with the December average of just under $4.

“The watch word will be volatility,’’ Kilduff said. “We’re going to be back into oversupply” in 2022.

Source: Bloomberg

Related Posts


Finance & Economy
Shipping News

Keppel Corp posts 9% drop in full-year profit

Singapore’s Keppel Corp said on Thursday its net profit for the year fell 9%, partly hurt by weak performance from its urban development business...

Stolt-Nielsen sees Q4 profits rise on strong markets

Stolt-Nielsen Limited reported unaudited results for the fourth quarter and full year 2022. The Company reported a fourth-quarter net profit of $95.3 million, with revenue...

Euronav delivers better-than-expected Q4 revenue

Euronav NV reported its non-audited financial results for the fourth quarter ended 31 December 2022. Hugo De Stoop, CEO of Euronav said: “Constrained vessel supply...

Wartsila: A challenging year with strong annual growth

HIGHLIGHTS FROM OCTOBER–DECEMBER 2022 Order intake decreased by 24% to EUR 1,638 million (2,150)Service order intake increased by 6% to EUR 791 million (747)Net sales...

Hapag-Lloyd achieves extraordinarily strong result in its anniversary year 2022

On the basis of preliminary and unaudited figures, Hapag-Lloyd has concluded the 2022 financial year – in which it celebrated its 175th anniversary –...

Baltic index hits over 2-year trough on waning demand for larger vessels

The Baltic Exchange’s dry bulk sea freight index dropped to its lowest level in...

Luxury Cruise Market Holds Much Promise For Greek & East Med Hidden Gem Destinations

The appeal of Greece and the East Mediterranean as an ideal region for luxury...

Baltic index falls to over 2-year low as larger vessel rates slide

The Baltic Exchange’s dry bulk sea freight index fell to its lowest since June...

Baltic index logs worst month in 3 years

The Baltic Exchange’s main sea freight index registered its biggest monthly percentage fall in...

Baltic index snaps 9-day losing streak as panamax, supramax rates rise

The Baltic Exchange’s main sea freight index snapped its nine-session losing streak on Tuesday,...

DP World wins bid for development of a mega-container terminal at India’s Deendayal Port

DP World has won a major concession to develop, operate and maintain the mega-container terminal at Deendayal port in Gujarat, on the western coast...

Luxury Cruise Market Holds Much Promise For Greek & East Med Hidden Gem Destinations

The appeal of Greece and the East Mediterranean as an ideal region for luxury cruising will be one of the main highlights of the...

Port of Los Angeles proposes cruise terminal project

The Port of Los Angeles is inviting comments on a draft Request for Proposals (RFP) for the future development of a new Outer Harbor...

Port of Long Beach Closes 2022 with Second-Busiest Year

The Port of Long Beach marked its second-busiest year on record by moving 9.13 million twenty-foot equivalent units in 2022, allowing for a return...

Hapag-Lloyd AG acquires share in J M Baxi Ports & Logistics Limited

Hapag-Lloyd AG signed a binding agreement today under which it will acquire 35% of J M Baxi Ports & Logistics Limited (JMBPL) from a...