Natural-gas prices at lowest since 2020 on mild weather, ample supply ‘double whammy’

Natural gas has fallen to its lowest price since mid-2020, with warmer U.S. weather and ample supplies of the fuel pulling prices down for a sixth session in a row on Tuesday.

“It’s a double whammy of really strong supply, while we leave the peak of the bleak midwinter in the rearview mirror,” Matt Smith, lead oil analyst, Americas, at Kpler told MarketWatch.

The front-month March natural-gas futures contract
NGH24,
-5.83%
fell 10.3 cents, or 5.8%, to $1.665 per million British thermal units on the New York Mercantile Exchange, poised for the lowest finish since July 20, 2020, according to Dow Jones Market Data.  

Prices are down a sixth consecutive session — the longest daily losing streak since the eight-day session that ended Oct. 20, 2023.

“As the risk associated with winter recedes more rapidly than a snowman in a heatwave, prices have experienced a significant decline, particularly for near-term contracts,” said Brian Swan, senior commodity analyst at Schneider Electric, in a daily note. Natural-gas futures through the May contract traded below $2.

“‘As the risk associated with winter recedes more rapidly than a snowman in a heatwave, prices have experienced a significant decline…’”

— Brian Swan, Schneider Electric

“During this time of year, weather forecasts tend to exert more influence over the market than Wall Street,” with most seven- to 10-day models predicting warmer-than-normal conditions across most of the country, said Swan.

This likely “implies that we’ll observe smaller withdrawals from storage, leading to a surplus to the five-year average that is beginning to appear quite substantial,” he said.

Last week, the Energy Information Administration reported a net draw of 75 billion cubic feet, which “aligned perfectly with market expectations but was significantly smaller than the five-year average for this time of year,” said Swan.

That contributed to the surplus to the five-year average swelling to just over 10% — “approximately double where it was the previous week after colder January weather threatened to align inventories with seasonal norms,” he said.

The EIA will issue its weekly update on natural-gas supplies in storage on Thursday morning.

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