U.S. natural gas futures plunged more than 10% on Monday, falling to the bottom stage since August on forecasts for warmer-than-expected winter temperatures. The leg decrease builds on final week’s more than 24% loss, which was natural gas’ worst week since February 2014.
The contract for January supply traded at $3.68 per million British thermal models (MMBtu) round 10:15 a.m. on Wall Avenue, for a decline of 10.9%.
Once more Capital associate John Kilduff stated that all of it comes all the way down to bearish climate forecasts.
“We keep having bouts of relative warmth, on a weekly basis. That is keeping any meaningful heating demand at bay,” he stated. “The storage situation eased, as well, over the past several weeks, with natural gas inventories reaching normal levels, relative to the five-year average, overcoming a significant deficit that persisted into early fall.”
Natural gas climbed for a lot of the 12 months as stock remained tight, and fears of a scarcity in Europe lifted U.S. costs. U.S. oil reached a seven-year excessive in October. These additionally led to calls that energy producers would swap oil in favor of natural gas.
Finally, natural gas hit a more than seven-year excessive of $6.466 per MMBtu on Oct. 6. However the declines since have been swift, and final week’s drop between Monday and Thursday was the worst four-day run in 1 / 4 century, in keeping with information from Bespoke. The losses come after November’s 15.8% decline, which was the worst month in a 12 months.
“A 10% move downward is frankly not surprising considering that the peak heating season really hasn’t even begun yet,” stated Campbell Faulkner, senior vice chairman at OTC International Holdings. “Until the weather forecasts (and weather) begin to turn colder, the natural gas complex will experience very bearish pressures.”
For the 12 months, natural gas continues to be up 47%, on tempo for the most effective 12 months since 2016.
Morgan Stanley stated that whereas the dangers “skew negative” heading into subsequent 12 months, there are some constructive drivers, together with extra LNG tasks that ought to help demand progress, in addition to tightness within the coal market boosting utilities turning to gas as an alternative.
The agency’s 2022 base case forecast stands at $3.75 per MMBtu.