Over the past week, the price of natural gas has increased by more than 11 %. The major factor behind the growth was the reports of significant temperature decrease in most parts of the U.S. On Monday, the price of natural gas rose by 3.9 %. On Tuesday the growth exceeded 2.6 %.
Three months ago, the quotations regained their multi-year lows and since then the gas price has risen by more than 36 %. Today, trading is at its highest level since March of this year.
The price of natural gas is traditionally very dependent on weather forecasts. Cold weather leads to a significant increase in physical demand for the asset and its value. Last year, reports of cooling in the U.S. and a shortage of supply led to an increase in quotations to a level of $5 per million Btu. The asset's value was reduced due to record production growth and increased reserves.
The asset growth is now driven not only by fundamental but also by technical factors. According to the data provided by the Commodity Futures Trading Commission (CFTC), investors began to actively reduce the short position on gas. This trend may only intensify with further growth in gas prices.
In the near future, investors will pay increased attention to the publication of industry statistics from the United States. According to the report of the Ministry of Energy for the period from 19 to 25 October, gas reserves in storage facilities decreased by 86B, but still exceed the average 5-year value in this period of time. The report for the period from October 26 to November 1 will be presented on Thursday. The data on further reduction of gas reserves may strengthen the bullish mood in the market.
At the moment, the positive movement dynamics are also reflected in other energy carriers. Over the week, WTI crude oil rose in price by more than 2.5 % and Brent by 1.7 %. The key factor is the news about the course of trade negotiations between the USA and China.
According to the latest reports, the parties are close to completing the formation of the first part of the agreement and are now actively negotiating to abolish some of the previously introduced tariffs. The United States wants to keep the current duties unchanged and not introduce new ones. China insists on lifting all previously imposed restrictions. A foreign trade agreement between the world's two largest economies could be a good driver for global economic growth and energy demand.
Another factor in the growth of oil prices was OPEC's forecasts of a gradual decrease in supply in the market in the next 5 years. According to OPEC experts, this is necessary to stabilize oil market prices and maintain a balance of supply and demand. According to the cartel experts, by 2025 the volume of supply will be reduced by 1.6 million barrels per day. A year ago, OPEC predicted a 0.5 million barrels per day increase in supply. The cartel noted that the revision of forecasts is associated with a stronger than expected growth of shale oil production in the U.S. and the slowdown in the global economy.
At the moment Brent oil is traded around $63 per barrel, WTI is about $57, maintaining good opportunities for further growth.