Henry Hub gas futures up 8%

Henry Hub gas futures up 8%

Natural gas has broken above the 2019 spike high of $4.92 and climbed through $5 to the highest since 2014.

Given that natural gas is a very seasonally-traded commodity, perhaps it's even more important that it's trading at 13-year high for this time of year. That takes it back to before the shale revolution.

There are some good arguments that a perfect storm is brewing. US drilling remains low in part because oil drillers have grown much more cautious. At the same time, pipeline exports to Mexico is up and more LNG export capacity continues to come online.

Natural gas prices in Europe are at all-time highs and inventories there are extraordinarily tight ahead of the winter. There are growing questions about whether Russia has enough gas to fill its own tanks and boost exports.

In the US, storage is about 13% below average for this time of year but that ignores that there should be a secular shift towards higher inventories due to coal-to-gas power plant conversions and LNG.

Ultimately, natural gas always hangs on the weather. If it's cold this winter, there could be a super-spike.