HG MARKETS:

U.S. natural gas futures surged on Thursday, with December contracts surpassing the $3.048 resistance, reaching $3.125. This rally is driven by colder weather forecasts and sustained LNG feed gas flows, with Maxar Technologies predicting a significant temperature drop from November 28 to December 2, boosting heating demand. The increase follows Monday and Tuesday’s gains, bringing December futures to a five-month high. U.S. natural gas consumption is rising, with Lower-48 demand at 77.6 Bcf/day on Tuesday, up 1% year-over-year, while electricity generation also saw a 3.19% annual rise for the week ending November 9, further supporting strong natural gas usage. Abundant supply could limit further price hikes. The latest EIA report shows a storage build of 42 Bcf for the week ending November 8, exceeding the five-year average of 29 Bcf. Inventories are 6.1% above the seasonal average and 3.7% higher year-over-year. European storage is also strong, at 93% capacity, slightly above the historical average. 

Furthermore, the escalating geopolitical tensions between Russia and Ukraine are also acting as a tailwind for gas prices. After firing a U.S.-made missile into Russia earlier this week, reports now suggest Ukraine has launched British-made missiles into Russian territory. The market is closely monitoring Russian gas pipeline flows to Europe, especially after Gazprom halted supplies to OMV, though flows via Ukraine remain stable for now. European gas storage has dropped below 90%, slightly under the 5-year average of 91%. The narrowing spread between Asian spot LNG and TTF is expected to lead to more LNG imports into Europe as winter progresses.

Additionally, a powerful “bomb cyclone” has struck the northwestern U.S., leaving over 500,000 households without power and causing widespread damage on Wednesday. Gusts over 60 mph (96 kph) uprooted trees and damaged power lines, causing widespread outages. Puget Sound Energy reported 314,000 outages, while Snohomish PUD and Seattle City Light reported 119,000 and 105,000, respectively. In Washington, southwest Oregon, and Northern California, over 530,000 homes and businesses lost power, down from more than 600,000 earlier, according to Poweroutage.us. The disruption of energy supply caused by bomb cyclone is further adding to rising gas prices.