Natural Gas: Race higher should run out of steam - BMO
20.09.2021, 10:41

Natural Gas: Race higher should run out of steam - BMO

FXStreet notes that these are good times for natural gas producers, which could extend into next year. Thus, the risks to Bank of Montreal's (BMO) annual average forecast for Henry Hub of $3.50 for 2021 and $3.00 for 2022 remain skewed towards the upside.

“Henry Hub has surged above $5.00/mmbtu, which is adding further fuel to the commodity supercycle debate. We do not think prices will remain at current levels for an extended period though they are unlikely to return to the pre-pandemic lows when it appeared as if the world was awash with natural gas.”

“We expect temporary/weather-related factors, namely the global heatwave and the impact of Hurricane Ida, which have been largely responsible for the surge in price since early June, to ease. However, better weather, assuming the winter does not make an early arrival or prove to be colder than normal, may not pull the rug out from under the feet of Henry Hub due to effectively flat domestic production and, moreover, robust overseas demand for liquefied natural gas (LNG).”

“Looking beyond the impact of weather and lower-than-normal inventories, European LNG demand should remain steady from a medium-term perspective, supported by the planned retirement of a large number of coal and nuclear power generation plants.”

“There is rising global competition for LNG, and it may persist in the short-term. However, there appears to be a limit to how much higher LNG prices could rise as there are rumours that Japan is considering reigniting oil-fired power plants, while the UK actually restarted an old coal-fired power plant earlier in the month.”

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