Natural-Gas Prices Surge as Summer Cooling Season Switches On

Natural gas prices are on the rise ahead of the air conditioning season, hitting their highest levels in about 14 years.

Prices hit $9/million British thermal units for the first time since 2008, before frackers flooded the market with cheap shale gas. The cost of fuel for power generation has increased by more than 20% this month and has more than tripled in the past year, putting additional pressure on household budgets and production costs.

Natural gas is the main cause of inflation, and prices are rising rapidly. In addition to heating and cooling, gas prices also affect the cost of electricity, fertilizer, plastics, cement, steel and glass. Profits are pinching at businesses, from beer box makers to wallpaper makers to bitcoin miners, and higher costs are driving down prices for consumers and putting pressure on the Federal Reserve. Federal to raise interest rates.

Dollar tree Inc.

Executives told investors on Thursday that while high energy prices and inflation could drive customers to more than 16,000 of their discount stores, the company itself faces costs. higher. The company raised the price of most of its eponymous stores to $1.25, from $1, and warned investors that it expected its costs to increase for the rest of the year.

“Rising natural gas prices is affecting utility costs across the business,” said CFO Kevin Wampler.

Fuel analysts and traders say prices could rise even higher if hot weather arrives and air-conditioning is shut down before it can pump enough gas into storage tanks before winter, when fuel is burned for heat.

U.S. gas inventories ended last week 15% below the five-year average, the Energy Information Administration said on Thursday. The shortfall in gas inventories increased during the week due to smaller-than-normal stockpiles.

Inventories have fallen on strong demand for liquefied natural gas, or LNG, among European buyers of Russian gas substitutes and domestic drills, who have been slow to ramp up production. despite the highest prices in years. U.S. gas production has rebounded from a low but has not kept up with demand due to rig shortages and bottlenecks, limited pipeline capacity in some areas and an executive compensation plan that days This encourages profitability over production growth.

Meanwhile, all-time high Appalachian coal prices and a drought-driven drop in hydroelectricity in the American West boosted gas-fired power demand. Forecasters expect the La Niña weather pattern to bring another hot summer, with the possible exception of the South, where unusual humidity could drive demand for air conditioning even as heat degree does not increase.

U.S. electricity bills have skyrocketed, and are likely to go higher as households tear down their air conditioners. WSJ’s Katherine Blunt explains why electricity and natural gas prices have risen so much this year and offers tips on how to manage costs. Illustration: Mike Cheslik

“There is almost no cap on natural gas,” said Kent Bayazitoglu, an analyst with energy consulting firm Baker & O’Brien Inc., in a statement. much more than reducing natural gas consumption”.

Investors flocked to manufacturers’ stocks as other stocks fell. Shares of EQT Corp.

, the largest US gas producer, has more than doubled in the past three months while the S&P 500 stock index lost more than 7%. Comstock Resources Inc.,

which exercises just north of LNG export terminals along the Gulf Coast of Texas and Louisiana and is largely owned by Dallas Cowboys owner Jerry Jones, has more than doubled since Russia invaded Ukraine in late February.

Commodity Futures Trading Commission data showed hedge funds and other speculators this month reduced their bets on bulls as futures rose from around $7 at the end of April. The remaining bullish bets are roughly equal to the unfinished short positions or the bets that the price will fall.

Trading firm Ritterbusch & Associates told clients that low inventories and high number of bets on falling prices were the reasons it raised its July futures forecast to $10, up from $9. la. The idea is that if the price continues to rise, traders with short positions will have to buy the futures contract to close their bets, pushing the price up even more.

Futures for June delivery, which expires on Thursday, ended at $8,908, down from a high of $9,401. The July futures contract was pegged at $8,895 in more active trading.

High oil and gasoline prices can help curb natural gas prices by encouraging drilling in places like West Texas, where crude oil is a target and much gas is a by-product, Bayazitoglu said. He expects natural gas prices to drop once the first major heatwave of the summer is over.

“It’s like a roller coaster ride,” he said. “You don’t worry about going down, but going up.”

Write to Ryan Dezember at ryan.dezember@wsj.com

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https://www.wsj.com/articles/natural-gas-prices-surge-as-summer-cooling-season-switches-on-11653537481?mod=rss_markets_main Natural-Gas Prices Surge as Summer Cooling Season Switches On

Edmund DeMarche

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