Natural gas prices May fall below $3
2023.01.14 02:11
Natural gas prices May fall below $3
By Tiffany Smith
Budrigannews.com – After the United States government reported a rare winter-season storage build for inventories of the heating fuel a day ago, natural gas futures on the Henry Hub of the New York Mercantile Exchange plunged 7% on Friday to near 19-month lows and threatened a take out of the key $3 support.
The front-month gas contract ended the day at $3.419 per metric million British thermal units, down 27.60 cents, or 7.5%, from its session low of $3.417, which marked the contract’s lowest level since June 25, 2021.
Over the previous two sessions, February gas increased by a total of 1.5%, before ending the week lower by 8%. In just four weeks, warm winter weather has wiped out 52% of the market’s value.
The Energy Information Administration reported an 11-bcf, or billion cubic feet, in builds for the week ending Jan. 6. This prompted Friday’s leg lower on the Henry Hub.
Some industry analysts had predicted a build of less than 10 bcf last week, but the increase in gas inventories occurred during what was being called the warmest start to a winter in 20 years. Reuters polled 14 analysts and found that the average draw from storage last week was 15 billion cubic feet.
Some participants in the market had anticipated that the front-month gas contract’s last traces of $3 support would disappear this week in response to an extremely bearish storage report, bringing back $2 trading levels not seen since May 2021.
However, despite the fact that there was no indication of what might take place the following week, technical charts had indicated that Henry Hub’s front-month would remain above $3 this week.
According to Sunil Kumar Dixit, chief technical strategist at SKCharting.com, “I see the current bearish streak extending to the 100-Month Simple Moving Average of $3.29” for the time being.
Natural gas futures collapsed abruptly last month following explosive upward price action for the majority of 2022 from weather extremes and a supply squeeze caused by political and other disruptions to Russian gas output following the invasion of Ukraine. The unseasonably warm winter temperatures that have left the heating markets in the United States and Europe sufficiently stocked are primarily to blame for the shift.
Since the Freeport liquefaction facility in Texas was shut down in June, exports of LNG—also known as liquefied natural gas—have also decreased, with approximately 2 billion cubic feet of gas being idled each day. That has nothing to do with how the weather is going.
In a note to its natural gas clients, Houston-based energy trading consultancy Gelber & Associates stated, “Sellers are back in the proverbial driver’s seat due to a couple of catalysts.”
According to the statement, “It is becoming increasingly evident that the Freeport LNG export terminal will likely not return to operation in February, adding another 60 bcf to gas storage stocks.”
On the weather front, Gelber stated that despite the fact that longer-range forecast models like the U.S. Global Forecast System and the European ECMWF predicted colder temperatures toward the end of January, the actual outcome may be a “quick freeze… punctuated by unseasonable warmth.”
Weather forecasters generally agree that, with the exception of a brief period of cold weather for the Southeast this weekend, overall mild temperatures are unlikely to change until at least January 22.
Therefore, the longer-range weather models anticipate that the bitterly cold Arctic winds that are typical for this time of year will not return for at least another week.
Gelber stated that there were signs of a “serious wave of extensive Arctic cold around the end of the first week of February.” “The gas market will likely view any winter outbreaks with skepticism” until “there are better agreements among all the significant weather forecast models on the February outlook.”
More Exxon Mobil expands in Texas
