Here's Why The Long-Term Prospects Of Gas Prices Look Bleak
BlackBull Markets | Oct 03, 2021 08:33PM ET
Natural gas bulls have been riding the gravy train for the better part of 2021. Remarkably, natural gas prices have skyrocketed 115% since the beginning of the year, outperforming price increases in other commodities like oats (up by 63.83% YTD), copper (up by 19.65% YTD), and steel (up by 38.27% YTD).
At the time of writing, natural gas is trading at $5.592 per million British thermal units, a thirteen-year high for the commodity.
An unusually scorching 2021 summer in the US drove demand for air conditioning and natural gas beyond normal levels, resulting in a lower stockpile of the commodity for a freezing winter. Following this, extreme weather conditions, such as Hurricane Ida, interrupted natural gas extraction in the Gulf of Mexico's most productive zone.
h5 /h5 h2 Could The Price of Natural Gas Recede?/h2Typically, when the price of a commodity rises, new investments will enter the market to scoop up the high prices. The new investment could be from gas companies lifting output at existing gas wells or exploring new wells to raise production.
Counter-productively, the new investment and resulting lift in gas supply would help suppress the price rises in the commodity.
New investments in natural gas have stalled as of late. While we will still need fossil fuels for a long time, so-called 'Zero Carbon' policies from governing bodies worldwide are disincentivizing natural gas exploration.
The long-term prospects of natural gas wells are uncertain and less attractive when contending with the likes of the Biden administration throwing its full support behind renewable energy sources as the US engages in a wide-scale upgrade to its infrastructure.
Get The News You Want
The Biden Administration aims to have the US electric obtain 50% of the power it uses from solar energy sources within the next thirty years. Achieving this goal would severely squeeze demand for natural gas, which, according to the EPA, generated approximately 40% of the country's electricity in 2020.
h2 Natural Gas Technical Price Analysis/h2In this video, we analyze possible trading zones to eye for future movements in the commodity.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.