Nat gas blows up on colder temps
Natural gas prices exploded early Friday to the highest level since Oct. 3, up 30% from just three weeks ago. The eight- to 14-day weather forecast has below normal temperatures stretching across almost the entire lower 48, with only the bottom half of the Florida peninsula seeing above normal readings. Temps far below normal cover the northern Plains, the Midwest and as far east as Pennsylvania. By late morning, prices reversed lower with speculators fearing these prices had moved up too far and too fast as profit-taking caused a huge sell-off. Thursday’s natural gas storage report was bullish, indicating U.S. gas in storage is declining. Liquid natural gas storage and shipments played a big role in both the rally and the decline.
Colorless, odorless and down on the farm
In addition to use for heating, electricity generation and various industrial purposes, natural gas is a key component in farming. In fact, 70-80% of the energy used to produce U.S. nitrogen-based fertilizers comes from natural gas.
On the farm, the gas also heats greenhouses, powers irrigation systems and runs farm equipment. A consistent, inexpensive flow of natural gas is vital to the U.S. to assure an affordable food supply to the population, free of any dependence upon foreign gas.
Increased domestic use as cold weather approaches along with profits from exporting and shortages in gas storage facilities will affect prices this winter.
Geo-political bombs explode natural gas price certainty
One other factor affecting natural gas might be the possible nomination of Chris Wright as the new U.S. Energy Secretary. The AP reports that Wright is a strong advocate for the use of fossil fuels, such as coal. He is opposed to fighting climate change and could be less interested in the advantages offered by natural gas as a viable, cleaner energy source moving forward.
On a global level, reduced pipeline supplies from Russia leave Europe needing additional liquid natural gas imports. Pricing volatility and supply concerns have created problems, especially in Germany, which has had to change its gas supply dramatically since Russia weaponized its natural gas supply. Russia’s firing of a ballistic missile into central Ukraine could be among the many events that affect the supply, the transport and the volatile price of this critical commodity.
CME midday prices: December metals: Gold, $2,709 per troy ounce; silver, $31.30 per troy ounce; copper, $4.08 per pound. January crude oil: $71.20 per barrel. January natural gas: $3.30 per 10,000 BTU. Price per bushel: January soybeans, $9.83; December corn, $4.27, December wheat, $5.44. December livestock per 100 pounds: Cattle, $186.35; hogs $80.85.
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