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08.07.2020 03:02 PM
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Excess fuel for heating and electricity led to a drop in gas prices. While other assets are recovering from the pandemic and rising in price, natural gas is lagging behind. Traders do not expect gas prices to rise at least until the start of the heating season.

Currently, the price of natural gas is set at 1.876 per million British thermal units. This is 23% lower than last year. Analysts believe that prices are unlikely to rise above $2 in the long term until the Americans begin to use heating.

Although gas is necessary for the operation of air conditioners, fuel prices are extremely low. In this regard, many American manufacturers have faced a difficult situation.

The collapse of prices to unprecedented lows was facilitated by the shutdown of gas supplies to Asia due to the coronavirus pandemic. The export of more than 110 cargoes was canceled, and the volume of deliveries has more than halved since the beginning of spring.

Now, instead of exporting, gas is stored in tanks, and prices for volatile fuel have fallen toa 25-year low. Analysts at Goldman Sachs Group Inc suggest an increase in gas reserves of 760 billion cubic feet, which is already 30% more than a year ago.

In autumn, gas stocks could reach the limit.

It is likely that large regional producers, such as EQT Corp., will be forced to cut production and shut down even more wells as production becomes unprofitable. Moreover experts suggest a fall in prices to 90 cents.

BofA analysts expect prices to average $1.75 this summer, but in the fourth quarter prices could rise to $2.60. Besides, according to experts, gas prices may reach $2.90 in the first three months of 2021.

Kate Smirnova,
Analytical expert of InstaForex
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