One week ago, after a three-year low of $ 4.20 / MMBtu, natural gas prices fell sharply, raising fears that the bullfight could end abruptly. Natural gas futures fell another 4% on Thursday The U.S. Energy Information Administration (IIA) reported Natural gas injections rose 49 billion cubic feet a week, ending August 6 on Wall Street, an average of 44 billion cubic feet.
After hitting three-year highs on the same stretch, gas prices have now quadrupled in five seasons.
However, for the longing, the $ 4.20 mark last Thursday shows even better times ahead. For bears, an unusual bull rally from the beginning of the year has finally ended in steam.
Here’s why bulls still dominate this market.
Low detail levels
According to experts, heat fluctuations in the cold side were the main culprits in delaying natural gas demand. Unfortunately for the slaves, this trend is expected to accelerate in the coming weeks As summer temperatures begin to decline, this will further reduce the need for cooling. Thanks to the tropical hurricane Fred, which is expected to bring rain, wind and cold temperatures to Florida this weekend.
That said, if short-selling experts are right again, they should look for another potential risk for the bulls next week: Summer heat can send a chill like a summer heat.
With estimates ranging from 9 bcf to 45 bcf, 26 BCF as an average estimate there is a lot of uncertainty about next week’s injection. If the actual needle levels are close to average, they will be significantly less than the 45 bcf and the five-year average of 42 BCF recorded in the corresponding year.
The biggest positive for bulls is that natural gas reserves are very low compared to historical standards – the total U.S. natural gas reserves are now 2.776 trillion cubic feet, down 16.5% a year ago and below the five-year average of 178 billion cubic feet.
In fact, the biggest concern right now is that US natural gas reserves may not be enough until winter. Due to strong export demand and strong energy shortages, US reservoirs have struggled to fill this need.
Supply congestion is rampant in Asia and Europe.
As a Report in the Financial Times, Solid gas supplies, low production in Europe and natural gas exports from Russia have risen sharply throughout Europe and Asia.
As a result, natural gas prices in Europe have risen to around 40 40 for the first time in MW (~ 14 / MMBtu), with UK gas prices rising sharply in 16 years.. The situation in Asia, where gas prices are 15 / MMBtu, is dire
The supply crisis is expected to intensify only in the coming weeks.
“Surprisingly, it wasn’t much of a concern. In terms of additional supply, there are not many options on the table around the world. Russia is actually the only source of licenses, but we do not know when there will be more destinations. so that. Traders around the world from Japan to Brazil are also seeing the value of Europe. ” Tom ICZ-Manner told FT at ICIS.
The long-term view of natural gas is brighter.
Natural gas and LNGG are currently being used as a bridge during the transition from coal to renewable energy, with less than 30% less than fossil fuels and 45% less than coal.
So, this is likely to be a long-term trend.
Although a combination of short-term tails, such as supply cuts, global economic recovery, and a standstill for new LNG export factories, are driving natural gas conferences, there is growing agreement on structural changes leading to clean energy transfer. This may be the new rule.
Related: Oil is sinking as demand declines
To make matters worse, investments in the new gas fields have been falling in recent years, in response to calls from climate-sensitive investors and governments. In Europe, for example, high carbon prices force consumers to convert to natural gas more quickly. As more and more governments in South and Southeast Asia prepare to meet dozens of new gas plants to meet the growing demand for electricity, China is ready to support gas more than ever. In addition, conversion to natural gas can be carried out relatively quickly with limited capital deployment.
With a few other viable alternatives, the world will continue to rely on more fossil fuels to achieve its short-term green goals.
»Even if you look at it, when big economies promise to achieve carbon emissions, gas will be the fuel of transition for decades. Gas prices are high in the medium term and are likely to increase in the long run.Chris Wefer, chief executive of Macro-Consulting Limited, told Bloomberg.
Natural gas assembly strengthens coal
Coal Prices (Dollars / Tons)
Source – Business Insider
Given this background, it is ironic that high natural gas prices are actually a big incentive for the oil that needs to be replaced – coal.
Coal prices rose to $ 146.25 a year, while higher natural gas prices encouraged more coal production.
Coal-related CO2 emissions are expected to increase by 17% this year, as coal plays a major role in the energy mix. As a result, the energy sector will grow by 7% with C02 emissions by 2021 to 4.9 billion m2.
By Alex Kimani to Oilprice.com
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