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Natural Gas: Despite Pullback Analysts Remain Bullish

November 18, 2021


After registering significantly below seasonal averages during the summer, natural gas storage levels are now rising and forcing prices to retreat

ChartAfter registering significantly below seasonal averages during the summer, natural gas storage levels are now rising and forcing prices to retreat

Natural gas data released by the U.S. Energy Information Administration (EIA) on Thursday brought some hopeful news for American homeowners dreading high utility bills during winter months as storage levels rose by 26 billion cubic feet (Bcf) for the week. Despite this improvement, levels remain below those registered during the same period last year. 

Utility companies have faced sharply higher natural gas prices in 2021 as demand from abroad drove futures prices to more than double before moderating in recent weeks. This global price sensitivity for US markets is a recent development. According to the EIA, net exports of liquified natural gas (LNG) have risen from zero in 2016 to more than 20Bcf per day currently. 

Rising export levels have also had a spillover effect on infrastructure and transportation. The EIA estimates that over 4Bcf per day of new natural gas pipeline capacity entered service during Q3 of this year, while LNG tanker freight costs tracked by Spark Commodities have registered record highs.

Key Points

  • Currently, energy market analysts hold a consensus bullish view on natural gas prices in the US despite replenished inventories as LNG export demand remains strong.

  • Weather conditions remain bullish for natural gas markets, with an early start to cold weather conditions in much of the US following increased demand driven by heatwaves over the summer.

  • According to a report from RBC Capital Markets issued Thursday, natural gas equities are up 110% YTD on average, a level that represents a 10 to 15% discount to the market’s historical average forward commodity price expectations.