U.S. natural gas prices experience an upward surge due to cold weather conditions and recent attacks on Red Sea shipping routes.
Price Spike and Market Impact
Futures for U.S. natural gas witnessed a significant jump of 7% on Tuesday, reaching their highest level since November. The overall increase in prices throughout this year amounts to over 13%. However, natural gas futures faced a slight setback of 2.5% in early trading on Wednesday.
Cold Blasts and Production Concerns
The possibility of cold weather fronts intensifying the demand for gas, coupled with potential disruptions to production, has contributed to the ongoing price surge. These factors have instilled concerns regarding global gas supplies.
Turmoil in the Red Sea
Ongoing turmoil in the Red Sea, which serves as one of the busiest shipping routes globally, further adds to the apprehensions surrounding energy supplies. During an attack by Houthi militants from Yemen, U.S. and U.K. warships successfully intercepted and neutralized 18 drones, making it one of the most significant engagements since the militants began targeting container shipments in November. These militants are protesting against Israel’s conflict in Gaza.
Impact on Global Markets
Being a net exporter of natural gas, the United States currently enjoys a surplus that it sells in global markets. However, the recent attacks in the Red Sea could potentially drive up energy prices, as it becomes more expensive to transport liquified natural gas (LNG) to Europe and Asia.
Oil Market Stability
In contrast, oil prices did not experience significant movement following these developments. The West Texas Intermediate (WTI) crude, a benchmark for the U.S., observed a decrease of 0.5% on Wednesday, settling at $71.90 per barrel. Likewise, Brent crude, the international standard, also faced a decline of the same magnitude, reaching $77.24 per barrel.