Natural gas prices and related ETFs continued to burn up as traders braced for possible disruptions to normal supply with Hurricane Dorian expected to intensify and make landfall over Florida.
The United States Natural Gas Fund (NYSEArca: UNG) increased 2.6% on Thursday while Nymex natural gas futures were 3.1% higher to $2.29 per million British thermal units. Natural gas prices were at their highest level in a month and are up about 10% from a multi-year low earlier in August.
While the ongoing shale oil boom in the U.S. has contributed to increased natural gas production, analysts warned that uncertainty over Hurricane Dorian’s path could help diminish supply in the short-term, providing a boost to natural gas prices on Thursday, the Wall Street Journal reports.
Tracking Hurricane Dorian
After moving across Puerto Rico and the British and U.S. Virgin Islands, Dorian headed back out onto open waters early Thursday. The Category-1 storm is now expected to gather strength as it continues toward the southeastern coast of the U.S. and could even turn into a Category-4 system.
The gathering strength of the hurricane now poses a potential threat to the operations around the Gulf of Mexico, bolstering energy markets as investors position ahead of potential lower output. However, analysts have warned that these short price spikes are short lived.
Related: Natural Gas ETF Warms Up on Weather Demand, Tropical Storm Risks
Hot weather conditions across the United States has also helped buoy prices on the demand side as more people turn on air conditioners and consume electricity to beat the heat.
Overall, price gains in the natural gas market have been hard as the U.S. continues to pump out record supplies. The Energy Information Administration recently said that natural-gas stockpiles rose 60 billion cubic feet last week, a larger-than-expected increase, and gas stockpiles were well above levels for the same period last year.
