Natural gas future touched 3-months high in mid-May, as high summer heat creates a greater demand for cooling energy use. In the meantime, Atlantic hurricanes may obstruct the natural gas supply, further rock the price.
Summer heat followed by the historically cold winter in the U.S. created a strong demand for natural gas, as many electrical generators use natural gas as fuel. As a result, the natural gas price has surged around 20% in 2021, amid pandemic recovery and high energy use. While the gain looked promising, compared to crude oil, which had almost a 42% rise in 2021 so far, one might argue that natural gas has seen some obstacles.
On the one hand, hot summer can only create limited demand as the significant demand hike for natural gas is the pre-amped storage preparing for the winter heating. Moreover, with the energy demand mainly being electricity, there are multiple fuel sources for heat-powered generators. On the other hand, natural gas has been seen as a “bridge fuel” to replace coal. However, EIA forecasts indicate that there will be a decline in natural gas use and an increase in coal use for generators, thus putting a layer of resistance on natural gas prices.
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