How high might natural gas prices go?
Market mindset has shifted to concerns of extended outage as the Strait of Hormuz blockages continue ahead of winter
THE start of September has seen a sudden upward surge in international natural gas prices. While headlines focus on crude oil crossing the symbolic US$100 per barrel mark, gas prices have been rising faster, and are trading close to the oil price equivalent of US$150 per barrel.
The gas price rally should not come as a surprise. Analysts have been fretting for months about the low levels of gas stocks in Europe. These need to be ramped up if Europe is to be ready for the winter heating season – and to secure supply, Europe must go head-to-head with Asian buyers.
But the warnings went unheeded. “Forward” prices for gas this winter remained resolutely flat relative to summer prices. So there was no incentive for traders to buy gas and pay to use storage for months, waiting on winter. Governments wanted to maintain a sense of calm.
