U.S. natural gas futures hit $10 per million British thermal units (MMBtu) early on Tuesday, jumping briefly above that threshold for the first time since 2008 as the energy crisis in Europe is worsening, and EU gas prices surged to another record today.
As of 8:43 a.m. ET, the front-month U.S. benchmark natural gas price at Henry Hub was up by 0.60% at $9.737/MMBtu, having hit $10/MMBtu earlier in the day.
U.S. natural gas prices have soared in recent weeks as Europe scours the world for non-Russian gas supply—mostly U.S. LNG—to fill gas storage sites in time for the winter heating season.
After a slump in early June due to the Freeport LNG force majeure, U.S. benchmark gas prices have rallied by 70% since the end of June, hitting last week their highest level since August 2008 at above $9.30/MMBtu.
This week, the prices exceeded $10/MMBtu as Europe braces for another halt of Russian gas deliveries via the Nord Stream pipeline to Germany for three days between August 31 and September 2. Germany and other EU countries are concerned that supply via Nord Stream—now at just 20% of the pipeline capacity—would be further cut or completely halted.
U.S. gas prices are rallying, but it’s nothing compared to the surge in Europe’s gas prices, which set another record on Tuesday, beating Monday’s record-high price.
Europe’s benchmark gas prices at the Dutch TTF hub soared by another 13% overnight to close to $297.55 (300 euro) per megawatt-hour, a fresh record high. The price has now doubled in just one month and currently sits 14 times higher than the average for the last decade, according to Reuters estimates.
The much higher gas prices in Europe, at around ten times higher than the U.S. benchmark in MMBtu terms, are set to pull more LNG exports from the U.S. to Europe, potentially further stoking the rally in U.S. natural gas prices. In addition, the U.S. domestic market offers bullish catalysts for local gas prices as domestic production remains flattish, gas demand from the power sector is strong in heatwaves, and stocks in storage are lower than normal, despite the outage at Freeport LNG, which has made available more gas for domestic consumption.
By Tsvetana Paraskova for Oilprice.com
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