US natural gas shrinks: worst month in three years

Liquefied natural gas (LNG) storage bunker at an LNG terminal operated by LNG Croatia LLC in Krk, Croatia on Monday 25 January 2021.

Petar Santini | Bloomberg | Getty Images

US natural gas futures fell to their lowest level in more than two months on Tuesday as warmer-than-expected winter forecasts drove prices down.

The contract for the supply in January fell 7% to $ 4.51 per million British thermal units (MMBtu). The weakness is exacerbated by Monday’s fall as the contract fell 11.37% to $ 4.85 per MMBtu.

Over the past two sessions, futures have fallen in price by more than 17%.

“The weather forecast for the main winter heating demand months (December, January, February) suggests higher-than-normal temperatures at major US demand centers,” said David Givens, head of North America Gas and Energy Services at Argus Media …

“[Monday was] The first day of January is the right month and both commercial (manufacturers, gas distributors) and non-profit market participants (speculators, hedge funds, pivot stores) are looking at fundamentals. [which is] lower prices, ”he added.

The sell-off in the past two days came after natural gas futures jumped 7% on Friday, despite oil falling 13% in the same session. The December contract expired on Friday, so traders could trigger position closings.

Natural gas is now down about 16% month-on-month, the worst month since December 2018. The contract has been declining for the second month already.

Natural gas trade has been volatile this year, with the recent sharp drop following a period of tremendous growth. The contract showed monthly gains from April to September, with prices rising 34% in September alone.

The gain continued until early October, when the contract reached $ 6,466 for MMBtu, the highest level since February 2014. The optimism has been fueled in part by calls for power producers to switch from oil to natural gas as crude oil prices rise. The energy crisis unfolding in Europe and the UK has also pushed up prices in the US.

Over the year, the volume of natural gas has still grown by about 80%. It’s also the best year since 2005.

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