U.S. natural gas prices extended a slide that started earlier this month due to forecasts of warmer weather in the near future.
In morning trade in Asia today, the futures contract for March shed 7.4% from Friday, falling to just above $3 per million British thermal units, the lowest price level seen since mid-October last year.
Earlier in the year, natural gas prices soared to the highest in years amid freezing winter weather that gripped most of the United States, driving demand for heating much higher, with wind and solar largely unable to respond to this demand surge. As generators leaned more heavily into gas generation, prices spiked, briefly topping $7 per mmBtu.
It’s worth noting that the price surge earlier this year came despite abundant gas in storage across the United States. Demand, however, surged because of the cold weather in both the United States and Europe, driving prices higher.
European demand will continue to feed an upside potential in U.S. natural gas prices as the EU’s storage is nearing depletion and would need to be replenished later in the year. In the immediate term, however, falling demand for heating as spring draws near will act to pressure prices.
As of Friday, the European Union’s gas in storage was at 33.97%, according to Gas Infrastructure Europe, with Germany’s even lower, at just 23.95%, and the Netherlands’ at 15.57%.
The U.S. National Oceanic and Atmospheric Administration has forecast that the next two weeks will bring warmer-than-usual weather for this time of the year to much of the country, notably central and southern states, which is expected to pressure demand for electricity and gas. This, however, suggests that if the forecast turns out to be wrong, as happens not infrequently with weather forecasts, gas prices could reverse course and move higher again.
By Irina Slav for Oilprice.com
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