Gas Market Is on ‘Knife’s Edge’ Despite U.S. Warmth, BNEF Says

(Bloomberg) -- Summery weather into October is easing a U.S. natural gas supply squeeze, but the market remains vulnerable to hair-trigger volatility heading into the winter, according to BloombergNEF.

Heating demand this month is expected to be the lowest in about two decades, allowing producers to add more than three times as much gas to underground storage as they did last October, BNEF said Tuesday in a report. As a result, stockpiles could approach normal levels before the winter, even after concerns about tight supply propelled prices to a seven-year high earlier this month. 

Still, the potential for supply shocks will remain a concern well into 2022. Though surging gas prices often prompt power generators to burn fuels such as coal instead, the coal market is in the midst of its own stunning rally. Limited fuel switching could mean considerably lower gas inventories next year.

“The gas market is currently balancing on a knife’s edge,” BNEF analysts Nakul Nair and Enrique Gonzalez said in the report. “There are several forces that can singlehandedly turn the outlook upside down at a moment’s notice.”

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