US NatGas Spikes Above $8 For First Time Since 2008 As LNG Exports 'Save Europe'

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by Tyler Durden
Monday, Apr 18, 2022 - 05:22 PM

US Natural gas prices surged to the highest level in 13-years on a confluence of factors, including shrinking inventory levels, strong export demand to Europe, and colder temperatures. 

Futures rose to $8.05 per million British thermal units during Asian trading, about double since the beginning of the year...

The first break above $8 since 2008...

Goldman Sachs' Ryan Voon wrote to clients on Monday that the spread between US and EU/Asia prices is beginning to narrow due to supply constraints. 

"US nat gas prices have remained below rates in EU and Asia due to shale field supply last year, but the discount has been steadily shrinking.

"Adding to the market tightness is the fact that backup US inventories held in underground caverns and aquifers are below normal for this time of year and production is holding flat," Voon wrote. 

The latest data from the Energy Information Administration showed US inventories only grew by 15 billion cubic feet in the week ended April 8, less than average for this time over the last five years. Overall stocks are 18% below seasonal levels.

Inventory woes also come as the US exports "every molecule of liquefied natural gas possible to help Europe reduce its reliance on Russian energy supplies," Bloomberg said.

For context - on an oil-barrel-equivalent basis, US NatGas is now trading at $136 (vs $109 for WTI)...

But there's a significant problem.

The US' mission to resupply Europe with LNG is taking critical supplies away from domestic markets and boosting prices sky-high, crushing American households to "save" Germans from shortages. 

Then there's the weather component. Below-average temperatures are expected across the northern U.S. between April 25 to May 1. Colder weather will drive heating demand and the need for natgas. 

The ongoing conflict in Ukraine and Western sanctions crimping Russian energy exports will further reduce the world's natgas supplies and continue pressuring prices higher. 

Based on soaring commodity prices, trends toward protectionism are rising, and it wouldn't surprise us if Americans demand a very similar approach as the rush to resupply Europe with energy products backfires.