US Natural Gas Prices Extend Steep Fall, Once Hitting Near 29-Month Low

Shortly after the opening of US stock market on Tuesday (February 21), US natural gas prices continued their decline and fell sharply.

The price of Henry Hub natural gas on the New York Mercantile Exchange for delivery in March once fell by more than 7%, reaching a low of $2.176/million Btu, the lowest level in 29 months. As of press time, the decline has narrowed to about 5.7%, and the price stood at $2.218/million Btu, almost half of this year’s peak.

Market analysts believe that the reason for the lower gas price is that the cold air has weakened again, which makes the demand for heating lower than expected. Earlier this month, the U.S. Energy Information Administration (EIA) pointed out in its "Short-Term Energy Outlook" that January temperatures in the United States were the warmest since 2006, reducing natural gas consumption.

Bearish fundamentals continue to dominate the market, analysts at energy consultancy Gelber and Associates wrote in a note, with natural gas production remaining strong, but with temperatures further dampening demand.

Last week, another report from the EIA showed that the production of crude oil and natural gas in the seven largest shale basins in the United States is expected to rise to a record high in March this year: Crude oil production will increase by about 75,000 barrels per day to a record 9.36 million barrels per day; natural gas will rise by about 400 million cubic feet per day to a record 96.6 billion cubic feet per day.

In addition, although Freeport, a major U.S. liquefied natural gas (LNG) exporter, has partially resumed operations, the destocking of natural gas is still not as fast as in previous years, dragging down prices. According to analysts' estimates, the current natural gas inventory is about 9% higher than the average of the past five years.

In addition to this, the trading sentiment of the market also played a role. Traders overall have come close to giving up the idea that "this winter will be colder" and instead betting on a winter that starts later this year.

Goldman Sachs, the top US investment bank, believes that the US natural gas market may enter a bear market cycle in 2023-2024. Prices have yet to form a firm bottom, and warmer weather and lower demand for heating could push gas prices further lower.

Looking across the Atlantic, natural gas prices in Europe have also fallen for days, with Dutch TTF natural gas futures for March delivery down 2.4% on the day to 48.655 euros per million British thermal units, the lowest level since August 2021.