Hormuz Tensions Spark Wild Price Swings in Natural Gas
Natural gas has been experiencing significant volatility in recent days, with prices briefly hitting $3.00/MMBtu on Tuesday before plummeting lower as cooling demand waned and strong LNG export needs took a backseat.
The commodity currently trades at around $2.91, despite being roughly 7% below year-ago levels. However, it has managed to stay in the green over the past month, with a gain of approximately 4%. US inventories are sitting 5.2% above their five-year seasonal average, while Lower 48 output remains near record highs.
The supply side appears well-stocked, but demand is anything but boring. LNG feedgas flows to major export facilities have climbed to 18.3 bcfd in early September from 17.2 bcfd in August as Texas plants returned from maintenance. Meanwhile, European and Asian buyers are scrambling to rebuild storage ahead of winter amid continued disruptions to Persian Gulf LNG supplies.
The geopolitical thread is the real wildcard here. Renewed attacks on tankers in the Strait of Hormuz over the weekend pushed European gas prices to their highest level in over three years, with Qatar largely suspending LNG shipments and extending force majeure on cargoes through autumn.