US NatGas Prices Slide To 18-Month Low On Warm Spell; Some Models Forecast Cold Blast In Weeks

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by Tyler Durden
Friday, Jan 06, 2023 - 06:00 PM

Natural gas futures plunged to an 18-month low on Friday morning, extending a further decline after mild two-week weather forecasts for the Lower 48 continued to drive down heating demand concerns and alleviate supply woes.

NatGas for February delivery dropped as much as 5.4% to $3.52 per million British thermal units in New York -- the lowest intraday price since early July 2021. Prices have plunged nearly 62% from a high of $9.62 in late August. 

Two-week temperature outlooks for the Lower 48 show temperatures well above a 30-year average. 

This means heating demand for residential and commercial buildings will slump, alleviating supply concerns. 

Houston-based energy firm Criterion Research sheds more color on why NatGas has fallen in recent weeks:

The natural gas market began the new year with very strong production and low demand, relative to normal weather. Production quickly recovered from the Christmas freeze-offs and is back near 99-100 Bcf/d, while demand has fallen through the floor amid above-normal temps across much of the country that are expected to last through the next two weeks. 

Criterion Research also noted winter isn't over:

The nation is likely to face further cold shots before the winter ends in April, but the supply situation and a lack of new demand coming online this year is presenting a strong case for high storage levels by the fall. If production runs flat through the remainder of the year and we get normal weather, it's very likely that storage will be well above the five-year average by October 2022.

There's already chatter among weather folks on Twitter about the increasing possibilities of a polar vortex blast later this month or early next though nothing is concrete.