US natural gas in for a wild 2022

US natural gas in for a wild 2022

U.S. natural gas is in for another wild year as the insularity that once shielded North American energy consumers from overseas turmoil disintegrates.

Benchmark American gas futures climbed almost 45% in 2021 for the strongest annual performance in half a decade after a deadly freeze that crippled output was followed by summer heatwaves that lifted demand and hindered efforts to stow away supplies for winter.

As 2022 dawns, traders, explorers and utility operators are facing the prospect of continued volatility amid rising competition from buyers as far away as Poland and the Netherlands who are dealing with a crisis so acute that factories have shut down and Goldman Sachs Group Inc. is warning there’s a “clear risk of running out of gas.”

“We continue to expect more price volatility to be present in these markets relative to recent history, albeit at a more diminished level once exiting the peak demand season of winter weather,” said Natasha Kaneva, head of commodities research and strategy at JPMorgan Chase & Co. “This is particularly true in the U.S., where price volatility has long been absent.”

Overseas buyers purchased 13% of U.S. gas production in December, a seven-fold increase from five years earlier when most of the infrastructure required to ship the fuel out of the country didn’t yet exist.

Prior to the advent of the American gas-export business, the U.S.-Canada market was a provincial sphere where prices were dictated by cold snaps in places like Pittsburgh and Chicago, and hurricanes in the Gulf of Mexico. But those days are long gone as brokers in Seoul and Rotterdam shell out record amounts to entice tankers laden with U.S. gas to sail their way.

Volatility in New York-traded gas futures surged to the highest in almost three years in early December as late-autumn concerns that the U.S. was on the verge of its own supply crunch collapsed on the back of milder-than-normal weather and prices tumbled more than 40% from an October peak.

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