No End In Sight For Price Swings In Increasingly Volatile Natural Gas Sector

[hatrack]

?w=1024

Above, Henry Hub prices reflect US prices for Natural gas, but regional swings may vary wildly. For bean counters, wild fluctuations are as intimidating as higher absolute costs. Gas has been historically volatile, and fracking’s rise has not changed that. The war in Ukraine is only one example of pressures being felt in gas markets.

EDIT

Wall Street Journal:

Homeowners and businesses across the country have seen their gas bills go wild—and the turbulence isn’t going to calm down anytime soon. Last year was the most volatile on record for natural gas, boosting the cost to heat homes, generate electricity and manufacture economic building blocks such as fertilizer and steel. Prices in 2022 whipsawed from unseasonable lows to shale-era highs and back again. Benchmark gas futures, which determine what millions of Americans pay for heat and electricity, swung by at least 7% on 44 days last year, the most since at least the early 1990s, when gas markets were deregulated and the modern trading era began.

The wild ride has continued this year, with 12 daily moves of 7% or greater. On many days, traders find it difficult to determine why prices move so sharply. Analysts, traders and big gas buyers expect this kind of instability to become the norm. Coal-fired power plants have been retired en masse without wind and solar farms ready to replace their output, pressuring utilities to pay up for gas. Infrastructure to export more gas is being built, but pipeline projects to move more gas within the country have been slowing.

The Kremlin’s invasion of Ukraine last year sent global markets haywire, sparking a scramble by European buyers to replace Russian supplies and tethering U.S. prices to international events even more. On Wall Street, trading programs that follow the price trends have come to dominate commodities exchanges, amplifying moves up and down. The algorithms can add momentum to shifts in the market by flipping large chunks of investors’ positions on any given day.

The severe swings diverge across regions. This winter, gas prices in California surged to more than six times the national benchmark price at the time. A fire at an important export facility in Texas kept traders guessing about supply and demand. Unusually warm weather cut heating demand in parts of the country this winter and knocked prices in February below a threshold rarely breached over the past 20 years.

EDIT

https://climatecrocks.com/2023/03/15/fossil-gas-wild-price-swings-with-no-end-in-sight/