US Natural Gas Prices Hit Six-Month High Amid Summer Heatwave, Australia LNG Strikes

    (Image Courtesy Of US Department Of Energy)

    According to the US Energy Information Administration (EIA), natural gas prices topped US$2.60 MMBtu last week. August is on track to post the highest natural gas prices since January. A summer heat wave, which featured record high average temperatures in July (and likely August) in much of the United States is contributing to higher electricity costs.

    Month January February March April May June July August 17 To August 23
    Price US$3.27 US$2.38 US$2.31 US$2.16 US$2.15 US$2.18 US$2.55 US$2.56

    (Data Source: US Energy Information Administration)

    Liquefied natural gas (LNG) prices are on the rise as importers boost reserves to prepare for cooler weather. LNG prices are also rising due to decreased supply from Australia. Strikes at Chevron’s Gorgon LNG and Wheatstone LNG sites are putting exports in jeopardy. The terminals have a combined export capacity of 24.5 MTPA. Removing that kind of production without notice is sending ripple effects throughout the spot market. What’s more, Australia’s Woodside Energy is also facing strike threats and talks of unionization, which could further disrupt the oil and gas and LNG market.

    According to S&P Global, OPEC+ oil production is at its lowest level since August 2021, mostly due to production cuts in Saudi Arabia which are supporting relatively high oil prices. West Texas Intermediate (WTI) spot prices have averaged more than US$70 per barrel every month of 2023 and are currently more than US$80.

    In sum, higher natural gas prices and strong oil prices are due to the usual suspects of increased demand paired with lower supply. If the trend toward harsher summers and colder winters continues, we could see greater seasonal spikes in energy markets going forward.