Natural-gas futures are seeing a historic surge, but the commodity could face another fresh burst higher if cold snaps occur early in the winter, jolting demand.
Natural-gas was down 7.5% on Wednesday, but up 4.6% for the week, nearly 50% for the quarter and 115% in the year to date, pushing the most-active contract to around its highest values since 2014, FactSet data show.
Recent weakness in wind generation in Europe, coupled with low natural gas inventories ahead of winter, has caused natural gas and electricity prices across Europe to skyrocket and Fisher predicted that the price surge could intensify to the point that natural gas hits $12 per million British thermal units.
At last check, the natural-gas continuous contract
was changing hands at $5.45 per Btus, on the New York Mercantile Exchange.
“It is all based on how much cold weather,” we get and how “early in the season,” that happens, Fisher told CNBC during a Wednesday afternoon interview. He said cold weather early will lead investors to consider “do we have enough stock” and a late cold snap would be less concerning because.
If it is early, “it is off to the races,” Fisher said.
Weather already has contributed somewhat to energy disruptions. There are over two months left in an Atlantic hurricane season, with the energy complex in the U.S. still reeling from Hurricane Ida, which briefly upended Gulf energy operations.
Hurricane Ida hit the Gulf Coast on Aug. 29. As of Sept. 15, 39% of the region’s natural-gas production remained offline, according to the Bureau of Safety and Environmental Enforcement.
Also contributing to a surge in natural gas’s trade higher is a post-COVID production deficit, and a push from the Chinese government to slash emissions by switching out coal, considered not environmentally friendly, in favor of natural gas, which is viewed as a cleaner burning fuel.
Reports indicate that in Europe rising prices have been compounded by depleted storage gas stockpiles and outages in the electricity grid. That includes a fire in cable from France as the U.K. faces a supply crunch, fueling the run-up in demand for gas-powered generators and driving prices higher, the Guardian reports.
Fisher is a widely followed commodity trader, known for making calls on oil and energy and who worked alongside hedge fund luminary Paul Tudor Jones.