U.S. natural gas futures are climbing as a cold spell forecast for the eastern United States this weekend drives expectations for increased near-term demand.
Nymex natural gas is up 0.9% to $3.246/mmBtu, according to data reported by The Wall Street Journal.
“Nymex futures pricing may increase short term, particularly if weather shifts even colder and regional spot prices continue to incentivize producer shut-ins,” Eli Rubin of EBW Analytics noted. Despite the short-term uptick, the medium-term outlook remains bearish. Rubin added that inventories are likely to reach 3.9 trillion cubic feet, noting that a “seasonal production boom” has yet to materialize.
European natural-gas prices have faced downward pressure recently, tracking broader declines in oil markets. The benchmark Dutch TTF contract fell 0.4% to 82.21 euros a megawatt hour in afternoon trading, marking a decline of more than 10% over the week, as reported by The Wall Street Journal.
This price dip is partially linked to market optimism regarding a potential diplomatic resolution to the Iran war. Despite the lower prices, regional storage levels remain a point of concern. Inventories across Europe are well below the seasonal average, which leaves the market susceptible to cold snaps or supply disruptions.
Germany faces specific challenges regarding its energy reserves heading into the new year. The country’s gas storage system operator has warned of potential supply shortages between January and March.
Why are U.S. natural gas prices rising while European prices fall?
The U.S. market is currently reacting to a specific weather forecast for the eastern U.S. that is expected to boost immediate demand. Conversely, the European market is responding to broader global energy trends and hopes for diplomatic progress, despite underlying concerns about low storage levels.
What is the medium-term outlook for U.S. natural gas?
The outlook is considered bearish due to high inventory levels, which are expected to approach 3.9 trillion cubic feet.
Analysts are also anticipating a seasonal production increase that has not yet hit the market.
What risks does Europe face regarding its gas supply?
Europe is vulnerable to supply disruptions due to inventories sitting well below the seasonal average. In Germany, operators have explicitly warned of potential shortages between January and March if the country experiences an extremely cold winter.