Why U.S. natural gas climbed to its highest price in more than 13 years
Natural-gas futures settled Thursday at their highest price since December 2008, with a rise in coal prices, tight supplies and global worries about energy supplies contributing to a price gain of more than 70% for the fuel so far this year.
U.S. natural-gas prices are “sensitive to any near-term supply concerns created by events like a ban on Russia coal exports, abnormally cold weather,” or Russian natural-gas export issues, given tight global supplies, said Rob Thummel, portfolio manager at Tortoise. The rally in the fuel’s price has also come as average weekly Central Appalachia coal prices, the U.S. benchmark for eastern coal, stood at $106.15 per short ton on April 1, up $8.85 from a week ago and at the highest since 2008, according to data from the Energy Information Administration. The run up in coal prices has led to higher demand for natural gas.
Natural-gas prices would rise correspondingly with the higher coal prices, at a time when natural-gas demand remains “robust” despite higher prices, he said. That’s partly due to “inability to switch to cheaper forms of energy.” Asia may opt to increase its use of coal to generate electricity, given higher natural-gas prices in the near term, he said, adding that the move would be “disappointing from a decarbonization perspective.”
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