Prices of natural gas at the futures markets had been close to their 52-weeks high amid reports showing tightening supplies at the world’s largest economy coupled with strong demand in the Northern hemisphere as the winter season becomes harsher.
At the time of writing this report, the natural gas contract due for delivery on March 21 traded at $3.050 per one million British Thermal Units, nearing its 52-week price high of 3.396 per one million British Thermal Units.
Energy traders are going long on the prized energy asset on reports that a rare deep freeze in America’s major oil hub, Texas-raised demand for power thereby forcing the U.S. state’s electric grid operator yesterday to impose rotating blackouts that left nearly 3 million customers without electricity.
Natural gas is a form of a fossil energy source that is primarily found and formed deep beneath the earth.
- Natural gas primarily contains hydrocarbon in the form of CH4 (methane) Carbon IV oxide and water vapor.
- Fossil gas is a fuel used majorly in powering electricity, warming many homes in emerged markets, and in the production of chemicals. A significant amount of natural gas is exported in liquified form often referred to as liquefied natural gas.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on other macro macros boosting the energy markets most particularly at the world’s largest economy;
“Accelerated vaccine rollouts globally and a sharp reduction in COVID-19 infections in the US provide the backbone for energy markets’ next recovery phase.
“And the most likely scenario should see absolute demand lift-off starting in spring or early summer amid heightened market overshooting risks as calls grow more vocal for an increase in the pace of reopening across the USA.”
Bottom Line, the unexpected US supply disruption in the natural gas market provides another short-term price recovery bridge that has likely taken natural gas prices to a level where markets were eventually heading but just a little bit quicker than expected.