Natural Gas Prices Plummet on Warmer February Forecast

Natural gas prices in the United States dropped by 17% in Asian trade on Monday, driven by forecasts for milder weather in the coming weeks.

Data from the National Oceanic and Atmospheric Administration cited by Bloomberg suggests that while most of the U.S. remains in the grip of cold winter weather, this is about to change, with parts of the country expected to see warmer-than-usual weather later this month.

Earlier this month, U.S. natural gas soared 117% over just five days amid the cold spell that led to a surge in the demand for heating and also reduced production, shrinking supply for both domestic consumption and LNG exports. ING analysts estimated that gas deliveries to LNG plants were down by as much as 48% last week.

The weather drove gas prices to the highest in four years, with Henry Hub topping $6.60 per million British thermal units last week as traders led to expect another mild January got a nasty surprise when they had to cover their short positions in equally short order.

While this happened, across the Atlantic, Europe saw its gas in storage continue to drain at much faster rates than usual. As of Saturday, the latest available data, EU gas in storage was at 41.13%. Germany’s was at 32.44%. Both levels are a lot lower than the average for the last five years.

Now, however, U.S. natural gas is down to $3.62 per mmBtu, which means that LNG prices are also going down, and Europe might get some respite on the spot market as gas storage refill season approaches.

Meanwhile, BloombergNEF reported, as cited by Nasdaq, that gas production affected by the snowstorms in the Lower 48 was gradually recovering, although it was still well short of demand. At 110 billion cu ft daily, the Friday production rate was 3.4% higher than a year ago but below the 128.7 billion cu ft in demand on that day.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com