A liquefied natural gas (LNG) storage silo at the LNG terminal, operated by LNG Croatia LLC, in Krk, Croatia, on Monday, January 25, 2021.
Petar Santini | Bloomberg | Getty Images
US natural gas futures plunged more than 10% on Monday, falling to their lowest level since August on predictions for warmer-than-expected winter temperatures. The lower section builds on last week’s more than 24% loss, which was the worst week for natural gas since February 2014.
The contract for the January delivery traded at $ 3.68 per million British Thermal Units (MMBtu) around 10:15 a.m. on Wall Street, down 10.9%.
Capital partner John Kilduff said again that it was all down to bearish weather forecasts.
“We have bouts of relative heat weekly. That keeps any significant heating needs in check,” he said. “The storage situation has also eased in the last few weeks, natural gas reserves have normalized compared to the five-year average and have overcome a clear deficit that lasted into early autumn.”
Natural gas rose for much of the year as inventories remained tight and fears of a shortage in Europe boosted US prices. US oil hit a seven-year high in October, which also sparked shouts that power producers would swap oil for natural gas.
Ultimately, natural gas hit a more than seven-year high of $ 6.466 per MMBtu on October 6th. But the declines have been rapid since then, and last week’s decline between Monday and Thursday was the worst four-day run in a quarter of a century. on data from Bespoke. The losses come after the 15.8% decline in November, its worst month in a year.
“A 10% downward move is honestly not surprising, given that peak heating season really hasn’t even started,” said Campbell Faulkner, senior vice president, OTC Global Holdings. “Until the weather forecast (and the weather) gets colder, the natural gas complex will be exposed to very bearish pressure.”
Over the year, natural gas has still increased by 47%, making it the best year since 2016.
Morgan Stanley said that while risks turn “negative” for next year, there are some positive drivers, including additional LNG projects that should support demand growth, as well as the tightness of the coal market that utilities are relying on gas instead will.
The company’s baseline forecast for 2022 is $ 3.75 per MMBtu.