Natural-gas futures climbed to their highest level in 14 years, with tight supplies in the U.S. and Russia’s move to reduce the flow of fuel to Europe pulling prices up for a second straight week. September natural gas settled at $9.336 per million British thermal units on Friday, the highest front-month contract finish on the New York Mercantile Exchange since August 2008, according to Dow Jones Market Data. Prices ended the week 6.5% higher.
The main reason for the natural-gas rally this week is the “sharply reduced flows from Russia amid a backdrop of only average stockpiles,” Tyler Richey, co-editor at Sevens Report Research, told MarketWatch. “Even with inventories sitting near their five-year average right now, the fact that flows from Russia through Nord Stream 1 are trickling at just 20% of capacity means that even modest demand at the start of the winter will quickly begin to draw supply down,” he said. “Below-average temperatures could very well see supply quickly depleted.” Russia’s state-owned energy producer Gazprom said in late July that natural-gas exports through the vital pipeline to Germany would drop to 20% from 40% of capacity. It attributed the decline to sanctions-related issues with turbines that had already reduced flows, according to a July 25 article in The Wall Street Journal. Read: Why natural gas may be in store for more price gains after a 50% climb in July On Frida …