By Natural gas prices have plummeted to their lowest level since mid-2020, as warmer U.S. weather and ample supplies have driven down the cost of the fuel for the sixth consecutive session. The decrease in prices can be attributed to a combination of strong supply levels and the end of the peak winter season.
According to Matt Smith, lead oil analyst at Kpler, the current situation is a “double whammy” of abundant supply and the fading winter season. This has resulted in the front-month March natural gas futures contract experiencing a 5.8% drop, reaching $1.665 per million British thermal units on the New York Mercantile Exchange. If this trend continues, it would mark the lowest finish since July 20, 2020.
The decline in prices marks the longest daily losing streak since October 20, 2023. Brian Swan, senior commodity analyst at Schneider Electric, explains that the decline in prices can be attributed to the diminishing risk associated with winter. As a result, natural gas futures through the May contract are now trading below $2.
With the winter season gradually receding and supply levels remaining strong, natural gas prices are expected to continue their downward trend.
Weather Forecasts Influence Natural Gas Market
Weather forecasts are having a greater impact on the natural gas market than Wall Street during this time of year, according to Brian Swan from Schneider Electric. Most seven- to 10-day models are predicting warmer-than-normal conditions across the country. This leads to smaller withdrawals from storage, resulting in a surplus to the five-year average which is becoming significant.
The Energy Information Administration (EIA) recently reported a net draw of 75 billion cubic feet. Although this aligned with market expectations, it was considerably smaller than the five-year average for this time of year. As a result, the surplus to the five-year average has reached just over 10%. This is roughly twice as much as the previous week, when colder January weather threatened to align inventories with seasonal norms.
On Thursday morning, the EIA will release its weekly update on natural-gas supplies in storage.
Comments