Natural-Gas Prices Surge As Summer Approaches

"Natural-gas prices are heating up ahead of air-conditioning season, hitting the highest level in about 14 years.

Prices topped $9 per million British thermal units for the first time since 2008, before frackers flooded the market with cheap shale gas.

The cost of the power-generation fuel has risen more than 20% this month and tripled over the past year, adding pressure to household budgets and manufacturing costs.

Natural gas has been a major driver of inflation, and prices have been accelerating. In addition to heating and cooling, gas prices factor into the cost of producing electricity, fertilizer, plastic, cement, steel and glass.

Profit is being pinched at businesses ranging from beer-box makers and wallboard manufacturers to bitcoin miners, and higher costs are trickling down to prices for consumers and putting pressure on the Federal Reserve to raise interest rates.

Dollar Tree Inc. executives told investors on Thursday that although high energy prices and inflation can send customers to their 16,000-plus discount stores, the company itself faces higher costs.

The company has already raised most prices at its namesake stores to $1.25, from $1, and warned investors that it expects its expenses to mount during the remainder of the year.

"Natural-gas price increases are affecting utility costs throughout the business," finance chief Kevin Wampler said during a call to discuss first-quarter earnings.

Fuel traders and analysts said prices could climb even higher if hot weather arrives and air conditioners are cranked up before enough gas can be injected into storage facilities ahead of winter, when the fuel is burned for heat.

U.S. gas inventories on May 13 were about 15% lower than the five-year average, according to the Energy Information Administration.

The deficit of stored gas grew during the week thanks to a smaller-than-normal build of stockpiles.

Inventories have been whittled down by strong demand for liquefied natural gas, or LNG, among European buyers replacing Russian gas and hesitation of domestic drillers who have been slow to increase production despite the highest prices in years.

U.S. gas output has rebounded from the lockdown lows but hasn't kept up with demand because of shortages of roughnecks and rigs, limited pipeline capacity in some regions and executive compensation plans that these days encourage profitably over production growth.

Meanwhile, the highest Appalachian coal prices ever and reduced hydropower because of drought in the U.S. West have boosted demand for electricity generated by burning gas.

Forecasters expect the La Nina weather pattern to deliver another hot summer, except possibly in the South, where unusual humidity could keep air-conditioning demand elevated even if temperatures aren't.

"There's almost no ceiling for natural gas," said Kent Bayazitoglu, analyst at the energy consultant Baker & O'Brien Inc. "You can reduce your driving a lot easier than you can reduce your natural-gas consumption."

Investors have flocked to producers' shares as other stocks have declined.

Shares of EQT Corp., the biggest U.S. gas producer, have more than doubled over the past three months while the S&P 500 stock index has shed more than 7%.

Comstock Resources Inc., which drills just north of the Gulf Coast's LNG export terminals and is majority owned by Dallas Cowboys boss Jerry Jones, is up 155% since Russia's sanctions in late February.

Hedge funds and other speculators this month reduced their bets on rising prices as futures climbed from about $7 at the end of April, Commodity Futures Trading Commission data show.

The bullish bets that remain are nearly equal to outstanding short positions, or wagers that prices will fall.

The trading firm Ritterbusch & Associates told clients that low inventories and the high number of bets on falling prices were the reasons it lifted its forecast for July futures to rise as high as $10, up from $9.

The idea is that if prices keep rising, traders with short positions will have to buy futures to close out their bets, pushing up prices even more.

Futures for June delivery, which expired on Thursday, ended at $8.908, selling off from a high of $9.401 that was hit after the U.S. storage report.

July futures settled at $8.895 in more-active trading.

High oil and gasoline prices could help keep a lid on natural-gas prices by encouraging drilling in such places as West Texas, where crude is the target and a lot of gas is the byproduct, Mr. Bayazitoglu said.

He expects natural-gas prices to ease once the first big summer heat wave passes.

"It's like a roller coaster," he said. "You don't get nervous going down, but going up."” [1]

We in Lithuania are so lucky to have the LNG ship for idiots. We can pay the highest prices for gas in this Galaxy.

1.   Natural-Gas Prices Surge As Summer Approaches
Dezember, Ryan. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 27 May 2022: A.1.