US natural gas surges over 4.5% amid pre-summer heatwave

US natural gas surges over 4.5% amid pre-summer heatwave

After falling to a 5-week low on Tuesday, US natural gas prices have rebounded, gaining 4% on Wednesday as excessive temperatures are expected to persist into next week.

As of 3:05 pm CT, Henry Hub natural gas prices were at $7.514, up 4.52%, up over 109% year-to-date.

July Nymex Natural Gas (NGN22) closed up +0.231 (+3.21%) on Wednesday.

Demand for natural gas to power air conditioning is expected to increase significantly as extreme heat warnings hit a third of the United States. Heat indexes are likely to break records in the next few days, putting additional pressure on electricity providers.

Heat waves are also spreading in Europe, where natural gas prices rose more than 20% on Wednesday. Gas prices in Europe continue to rise not only because of the temperature, but also because of Russia’s decision this week to limit gas supplies via Nord Stream.

On Tuesday, Gazprom said it would cut gas flows to Germany via Nord Stream by 40%, citing repairs to the equipment, prompting German officials to accuse Moscow of continuing to arm itself with natural gas.

On Wednesday, Gazprom said it had also reduced gas flow to Italy.

In the United States, natural gas prices fell Tuesday on news of a 90-day shutdown at the LNG export terminal in Freeport, Texas, following a blast last week.

″[C]Completion of all necessary repairs and return to full plant operations are not expected until late 2022,” the company said in a statement on Tuesday.

Freeport’s delayed restart is taking about 2% of demand off the market, suggesting a potential oversupply of natural gas.

On Wednesday, a potential oversupply ahead of Thursday’s release of Energy Information Administration (EIA) natural gas inventory data was offset by a heatwave suggesting a pick-up in demand.

By Charles Kennedy for Oilprice.com

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