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Nat Gas Tumbles Below $3 For The First Time Since 2012, Plunges 30% In 2014

Tyler Durden's picture




 

For the past few months, the one silver lining to the energy complex - with crude oil plummeting to levels not seen since 2009 - was nat gas, which soared to the mid-$4s in early November on expectations of a brutal polar vortex for the second year in a row sending heating demand surging. Well, so far the "harsh" weather, which was blamed for the epic collapse in the US economy in Q1 has not materialized, and all those buyers of natgas contracts have been scrambling to sell all of their exposure afraid they may suffer the same fate as their crude trading brethren. End result: as of moments ago, nat gas finally slide under $3, the first time it has done so since 2012!

This also means that while crude oil longs have had a horrible year, with nat gas now down 29% in 2014, and headed for the first annual decline since 2011 as mild weather leaves stockpiles at a surplus to year-ago levels for the first time in two years, yet another commodity is set to ring in margin calls for all those who are not long the USDJPY, pardon the S&P500, where the only trade off to daily all time highs is simply the total collapse of Japan as a nation state.

And since temperatures will be mostly above average in the eastern half of the U.S. through Dec. 30, according to Commodity Weather Group LLC, look for gas to keep sliding. From  Bloomberg:

“We haven’t seen a lot of cold weather this winter,” said Carl Larry, a Houston-based director of oil and gas at Frost & Sullivan. “The warmer it stays, the more pressure on natural gas. Gas production is not dropping and demand is not that high.”

 

Natural gas for January delivery fell 1.6 cents, or 0.5 percent, to $3.014 per million British thermal units as of 9:25 a.m. on the New York Mercantile exchange. Earlier, futures touched $2.98 per million Btu, the lowest since Sept. 26, 2012. Volume was 68 percent below the 100-day average for the time of day.

 

“This market continues to look oversupplied,” Aaron Calder, senior market analyst at Gelber & Associates in Houston, said by phone on Dec. 24. “We are seeing support at $3 but I would say that once we break that I think $2.70 is probably our lower technical target.”

 

“Unseasonably warm weather this month now necessitates extreme conditions ahead in order to avert a surplus,” Teri Viswanath, director of commodities strategy for the bank in New York, said in the report.

But while traders will be ok, the one industry that appears set to suffer the most is, once again, shale:

Output from the Marcellus shale formation in the Northeast may climb to 16.3 billion cubic feet a day in January, up 19 percent from a year earlier, the EIA said in its monthly Drilling Productivity Report on Dec. 8.

And now, since the Keynesian angle of "higher commodity prices mean more pent up demand and higher future growth" is finished, expect a major switch in the narrative to "deflation is actually good." Because apparently Austrians are only wrong whenever their being right does not conflict with the official propaganda of making trillionaires out mere billionaires.

 

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Fri, 12/26/2014 - 11:39 | 5593100 Headbanger
Fri, 12/26/2014 - 12:12 | 5593251 localsavage
localsavage's picture

Clearly  these record cold snaps aren't cold enough

Fri, 12/26/2014 - 12:21 | 5593288 SWRichmond
SWRichmond's picture

If one has no industry, nor jobs to pay for electricity or heat, what the fuck does one need natural gas for?

Fri, 12/26/2014 - 15:06 | 5593895 Hohum
Hohum's picture

And clearly there haven't been too many for the past month.  Should change next week.

Fri, 12/26/2014 - 12:11 | 5593252 localsavage
localsavage's picture

Clearly  these record cold snaps aren't cold enough

Fri, 12/26/2014 - 11:39 | 5593103 Bangin7GramRocks
Bangin7GramRocks's picture

Drill Baby Drill!

Fri, 12/26/2014 - 11:43 | 5593115 Counterpunch
Counterpunch's picture

Nulandistan is still fucked this winter.

Fri, 12/26/2014 - 13:40 | 5593523 noben
noben's picture

Actually... it means that the PRICE of gas cannot be used as a lever against Kiev, and Gazprom cannot profit from it. At this point in the global game, it is not the price of gas that can be a lever, but its AVAILABILITY.

Notice that the Temps are lot colder in Kiev than in Sevastopol. OTOH... Gas affects all of Ukraine, whereas the electricity is very targeted.

These tactics can and will eventually be construed as "Acts of Terrorism" because of their widespread and indiscriminate impact on the POPULATION of Crimea, and appropriate countermeasures can take place.

Lucky for Russia and Crimea, Pres. Bush set nice precedent in "prosecuting Terrorists" and regimes that support them. So there's that Pickle that the UN has to deal with, now that the shoe is on the other foot.

Fri, 12/26/2014 - 14:20 | 5593746 kaiserhoff
kaiserhoff's picture

Rubbish.

Natty can't swim.  The price in North America has little or nothing to do with the price, or availability, in Europe.

Fri, 12/26/2014 - 14:28 | 5593781 KnuckleDragger-X
KnuckleDragger-X's picture

LNG.....

Fri, 12/26/2014 - 14:54 | 5593867 angel_of_joy
angel_of_joy's picture

LNG is dead as a door nail...

Fri, 12/26/2014 - 11:43 | 5593118 MalteseFalcon
MalteseFalcon's picture

OMG, when do the specul--, I mean, workers get laid off in the "gas patch"?

Those poor workers.

LOL.

Fri, 12/26/2014 - 12:05 | 5593224 wrs1
wrs1's picture

Yeah, like this guy.  

 

http://i60.tinypic.com/dh94ea.jpg

 

Laid off for sure, hope you like paying his unemployment benefits.

Fri, 12/26/2014 - 15:20 | 5593338 sun tzu
sun tzu's picture

Fuck 'em, just like the tech workers getting replaced by H1B's from China and India and all the trade workers being replaced by cheap Mexican labor.

I hope they all lose their jobs and end up under a bridge. LOL

 

I forgot the /sarc

My point is these enery sector workers are humans just like the tech and tradesmen. Some idiots seem to think they're subhuman because they work on oil rigs, pipelines or drive trucks. At least they produce something useful instead of tweets and selfies. 

Fri, 12/26/2014 - 12:36 | 5593339 sun tzu
sun tzu's picture

Fuck 'em, just like the tech workers getting replaced by H1B's from China and India and all the trade workers being replaced by cheap Mexican labor.

I hope they all lose their jobs and end up under a bridge. LOL

Fri, 12/26/2014 - 11:43 | 5593120 john_connor
john_connor's picture

Nat gas kept relatively high until utilities locked in prices, now dumped. Retail consumer with GFA furnace gets screwed

Fri, 12/26/2014 - 11:50 | 5593162 ebworthen
ebworthen's picture

Employment and wages go down but never:  rent, utilities, or insurance.

That's how you bleed someone out, nice and slow like.

Fri, 12/26/2014 - 12:39 | 5593357 sun tzu
sun tzu's picture

Never made a claim on my home insurance, but the premiums are up over 30% the past 3 years.

Same with my car insurance.

Property taxes up 25% since 2010. 

Fri, 12/26/2014 - 19:16 | 5594536 bytebank
bytebank's picture

Property and school taxes went from $4500 ten years ago when I bought the place to just under $9,500. Used to cost $1000 for heating oil which went up to $3,500 last year. No inflation, at least not at the pay check side. /sarc

Fri, 12/26/2014 - 11:43 | 5593124 wmbz
wmbz's picture

The hits keep right on coming. The DOW should 19,000 in a few days now!

Fri, 12/26/2014 - 11:44 | 5593126 Mr. Bystander
Mr. Bystander's picture

It's been unseasonably warm in the Northeast US. Haven't needed to blast the heat or use it much at all. It broke well over 50 degrees yesterday on Christmas. The price can only go down further.

 

Fri, 12/26/2014 - 11:45 | 5593139 earnulf
earnulf's picture

Low Gas Prices are a boon to businesses that have to use nat gas (especially compared to the $15 run up a few years back), I would normally expect that producers would liquify and store the excess, but that would have required forethought and in this "i want mine and i want it now" meme, forethought is a foolish wish.

Fri, 12/26/2014 - 12:10 | 5593239 wrs1
wrs1's picture

Assuming you knew what you were talking about your post might make sense but it doesn't because ypou are another ZH poster with no clue about the actual business you excoriate for being stupid while you are much smarter.  No one "liquifies" their production.   NGL's are stripped off but no LNG is produced here in the US yet and storing it would be an even bigger problem.  However, what you might not know is that excess gas is actally stored in gigantic caverns underground and this is actually tracked as part of what the traders use to price gas.

 

Nat gas producers 1

Ignorant ZH posters 0

Fri, 12/26/2014 - 12:51 | 5593398 sun tzu
sun tzu's picture

What the fuck are you yapping about?

LNG is made from super-cooled NG. There are about 10 LNG terminals in the US.

 

Perhaps you know more about LNG than Royal Dutch Shell, but I doubt it.

http://www.shell.com/global/future-energy/natural-gas/liquefied-natural-...

Natural gas is a major source of energy, but many towns and cities that need the energy are located far from the gas fields. Transporting gas by pipeline can be costly and impractical. We create LNG by cooling the gas to a liquid to -160ºC, which we can then ship out, safely and efficiently.

LNG is a clear, colourless, non-toxic liquid that can be transported and stored more easily than natural gas because it occupies up to 600 times less space.

When LNG reaches its destination, it is returned to a gas at regasification facilities. It is then piped to homes, businesses and industries.

Shell helped pioneer the LNG sector, providing the technology for the world's first commercial liquefaction plant at Arzew, Algeria, in 1964. Since then, we have continued to improve the technology behind LNG.

Fri, 12/26/2014 - 14:07 | 5593705 wrs1
wrs1's picture

Which way do those terminals in he US work?  Do they compress it or decompress it?  I am completely aware of those completely useless and barely used facilities.  I am also aware of the fact that even your link refers to LNG facilities that produce LNG and which are not in the US.  Please read my post and update your response accordingly.  The only people close to producing LNG in the US is Cheniere and IMO, they are a scam of the highest order.

Fri, 12/26/2014 - 12:01 | 5593176 10mm
10mm's picture

Were a week into winter officially. Next week looks alot colder.

Fri, 12/26/2014 - 12:11 | 5593246 wrs1
wrs1's picture

Lot's of gaps above to fill, the shorts got their asses handed to them once in October and twice in November.  Storage is barely above last year at this point but there is a shitload more production from the Marcellus that is weighing on the market.  

Fri, 12/26/2014 - 13:50 | 5593627 disabledvet
disabledvet's picture

Somewhere out there is a truck driver with a tanker full trading this shit. "Just start ringing the dial to see who'll take delivery unlike Wall Street. His name is Joe Schlombowski I think. Lives at 2341 lake pleasent way in upper Norway, Maine.

And he has a fish farm...

Fri, 12/26/2014 - 11:56 | 5593178 Downtoolong
Downtoolong's picture

Oil, natgas, gold, and housing keep falling while Ali Baba, Facebook, Twitter, S&P futures, and the dollar keep rising.

Welcome to the new world market order, where everything imaginary is priceless and everything real is worthless.

Get long Santa Claus now, before they IPO him next year!

Fri, 12/26/2014 - 14:08 | 5593413 sun tzu
sun tzu's picture

Maybe you should tell the county tax collector that housing keeps falling. He takes 6 weeks of my pay each year and keeps wanting MOAR

Fri, 12/26/2014 - 13:55 | 5593618 noben
noben's picture

Yes. But that gambit is for rookies and fools. And clowns on acid think they can fly. Till reality sets in.

I'd think that it should be rather obvious to those with eyes, that Wall St is playing Liar's Poker and they are bluffing with a weak hand.

Q: Will you ante up (BTFD on real assets), or fold?

Fri, 12/26/2014 - 12:01 | 5593202 Seasmoke
Seasmoke's picture

The polar vortex really didn't smash the northeast in 2014 until February. 

Fri, 12/26/2014 - 12:02 | 5593212 Farmer Joe in B...
Farmer Joe in Brooklyn's picture

I can't wait to watch this whole story play out in 2015....

There will be blood.

Fri, 12/26/2014 - 12:41 | 5593367 sessinpo
sessinpo's picture

And usually it is the blood of the serfs. Is that you are talking about on TV, Farmer Joe?

Fri, 12/26/2014 - 12:12 | 5593248 alexmark2013
alexmark2013's picture
Due to the fall in oil prices, Saudi Arabia is running a $39 billion deficit. 2/3 of Saudis work for the government. Saudi budget deficit going to 5% of GDP next year http://investmentwatchblog.com/due-to-the-fall-in-oil-prices-saudi-arabia-is-running-a-39-billion-deficit-23-of-saudis-work-for-the-government-saudi-budget-deficit-going-to-5-of-gdp-next-year/
Fri, 12/26/2014 - 12:40 | 5593365 Ewtman
Ewtman's picture

Not surprising when you know where OIL is headed...

 

http://www.globaldeflationnews.com/oil-light-sweet-crudeelliott-wave-upd...

Fri, 12/26/2014 - 12:42 | 5593372 Kill or be Killed
Kill or be Killed's picture

Bring on the deflation.

Fri, 12/26/2014 - 13:53 | 5593638 disabledvet
disabledvet's picture

What better cure for the worst recovery ever than I generalized price decline? Everyone is equal because everyone loses! Hooray!

Fri, 12/26/2014 - 13:01 | 5593443 Soul Glow
Soul Glow's picture

Too bad for anyone long NG.

Fri, 12/26/2014 - 13:55 | 5593648 disabledvet
disabledvet's picture

"And a merry phi king christmas to you too asshole!"

Fri, 12/26/2014 - 14:06 | 5593703 herman55
herman55's picture

Bakken Oil, at the railhead, will sell for $37/barrel in 2015......mark my words.

Fri, 12/26/2014 - 14:15 | 5593740 franzpick
franzpick's picture

Crude future just ticks away from previous lows in the $54s.  The monthly chart says there's nothing between here and $40/bbl:

http://www.investing.com/commodities/crude-oil-advanced-chart

Sat, 12/27/2014 - 14:01 | 5596564 Voice of Reason
Voice of Reason's picture

Got bit on UNG.  Hoping it will bounce up at least briefly on its way down. Looks like a few up days are coming next week as a massive cold front approaches the US according to The Weather Channel.  Happy Trading!

Sun, 12/28/2014 - 06:20 | 5598367 Syameimaru
Syameimaru's picture

Leverage with KOLD. It will make my portfolio happy :)

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