Natural Gas Closes At 2-Month Low Below $5 As U.S. Heating Demand Disappoints By Investing.com

Posted by Parani Krishnan

Investing.com – U.S. temperatures are chilling but not fast enough for the bulls in the natural gas market, which suffered another drop in fuel prices Thursday, this time below the $5 mark, after disappointing heating demand data. .

The U.S. Energy Information Administration, or EIA, reported that utilities across America drew 87 billion cubic feet, or bcf, from the week ending Dec. 16 against market expectations for a withdrawal of 93 billion cubic feet.

“Although a large Arctic Explosion will dominate much of the United States over the next few days and bring wind chills near 0 degrees (Fahrenheit) in locations as far south as Houston, Texas, [pre-] The warm-up seemed more like a drive than a freezing cold event, Gelber & Associates, a Houston-based energy markets advisory firm, said in a note to clients.

On the New York Mercantile Exchange, Henry Hub settled down 34.2 cents, or 6.4%, at $4.99 per million metric British thermal units, or mmBtu. It earlier hit a session low of $4.984 per million British thermal units – a low not seen since October 27.

Over the past four weeks combined, gas futures have lost about 30%. Prior to that, the market was up nearly 20% in mid-to-late November on expectations that all of the US would be in a freeze during the Christmas week leading up to the new year.

The Global Forecast System, the preferred weather forecasting model for the United States, and ECMWF — the default version used in Europe — indicate moderate temperatures from the beginning of next week that may last through the first week of January. That runs counter to the frigid temperatures the two models initially called for from Friday through the end of the year.

“This is one of the most unusual periods of year-end weather forecasting I’ve seen in years,” said John Kilduff, partner at New York energy hedge fund Again Capital. “It explains the kind of volatility we’ve seen over the past month.”

Gelber & Associates agreed with Kilduff, saying:

“As long-range weather forecast models point to another large eruption in the Arctic during the second week of January, the potential upside appears to outweigh further downside risks.”

“Until some new bullish price-fixing mechanisms are introduced to the gas market, volatile price action is likely to continue for the coming week over the New Year holidays as overall market participation will be weak, which could open the door to wildly swinging prices.”

The consultancy added that dry gas production also needs to drop significantly to sustain a prolonged spike in gas.

On the production side, dry gas volumes remain near 99 bcfd – far from the November peak of around 102 bcfd – with additional losses potentially arising from a large-scale freeze of production wells. However, production as a whole is still up by about 1.5 bcfd year-on-year, which makes traders reluctant to support higher gas prices at this moment.