Futures Movers: Natural-gas futures up nearly 6% to settle at highest since January

Natural-gas futures climbed by nearly 8% on Tuesday, with a rally in coal prices as Europe mulled a ban on Russian energy, and some forecasts for colder weather in parts of the U.S. lifting prices to the fuel to their highest levels since January.

Oil futures, meanwhile, reversed course to trade modestly lower as Western leaders weighed the possibility of additional sanctions against Moscow in response to evidence of alleged war crimes in Ukraine.

Price action

May natural gas

traded at $6.163 per million British thermal units, up 45.1 cents, or 7.9%, with prices on track to mark the highest front-month contract settlement since late January, FactSet data show.

West Texas Intermediate crude for May delivery



declined by 35 cents, or 0.3%, to $102.93 a barrel on the New York Mercantile Exchange.

June Brent crude

the global benchmark, was down 31 cents, or 0.3%, at $107.22 a barrel on ICE Futures Europe.

May gasoline

lost 1.3% to $3.156 a gallon, while May heating oil

fell 2.9% to $3.442 a gallon.

Market drivers

If Europe cuts down on coal purchases and bans natural gas from Russia, there’s “going be more pressure from the U.S. to send every molecule it can over the next few months to Europe,” said Phil Flynn, senior market analyst at The Price futures Group.

French Finance Minister Bruno Le Maire on Tuesday said there was a “total determination” from all 27 European Union countries for sanctions against Russia that could target oil and coal after evidence emerged that its troops deliberately killed Ukrainian civilians. While the U.S. and U.K. previously moved to ban imports of Russian energy, EU countries have struggled to reach a decision given concerns over some nations’ heavy dependence on flows from the country.

U.S. natural-gas prices have “risen as a result of rising coal prices,” said Manish Raj, chief financial officer at Velandera Energy Partners, told MarketWatch.

Central Appalachia coal prices climbed to $106.15 per short ton as of the week ended April 1, according to the Energy Information Administration. Prices topped $100 for the first time since 2008, according to news reports, buoyed by a proposed European ban on Russian coal.

“Both coal and natural gas are the primary fuels for electricity production in the U.S., therefore the price of one impacts the price of the other,” said Raj. “As coal-fired power plants become more expensive, electric grids will look to natural gas-fired plants, thereby raising domestic natural-gas prices.” 

The natural-gas market also rose amid “cold in a large portion of the U.S., higher than normal cooling demand from the East Coast” and reports of a drop in liquified natural gas in floating storage, analysts at Zaner wrote in a daily market update.

Meanwhile, the impact of so-called self-sanctioning against Russia continues to be seen, said Warren Patterson, head of commodities strategy at ING, in a note, with Urals crude, Russia’s most common export, delivered to northwest Europe offered at a $34.80 a barrel discount to dated Brent.

Also see: Why U.S. consumers suspect gas price gouging — and how much stations actually profit from a gallon of the fuel

In addition, Russian oil output in March averaged 11.01 million barrels a day, down less than 1% on the month, according to Russia’s Interfax news service, though output declines are likely to increase in the months ahead as domestic storage fills up, Patterson said.

For now, however, “the market is just not buying a European ban on Russian energy,” said Raj. “The market remains unconvinced that Europe will actually ban Russian oil or gas.”  

Weekly petroleum supply data from the EIA will be released Wednesday. On average, analysts expect the report to show U.S. supplies down by more than 1.85 million barrels for the week ended April 1, , according to a survey by S&P Global Commodity Insights. They also forecast supply declines of 350,000 barrels for gasoline and 700,000 barrels for distillates.

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