US Natural Gas Price Sinks Amid Mild Winter

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Nat gas prices plunge amid shift toward milder temperature trends

Natural gas futures (NYSEARCA:UNG) settled -4.6% to roughly four-year lows at $1.72/MMBtu, with traders anticipating mild winter temperatures, steady production and weaker demand because of the coronavirus to result in a glut.

Natural Gas Intelligence reported a large milder shift in one of the major weather models overnight was responsible for sending natural gas prices tumbling.

The European model reportedly showed “big milder trends” overnight, with “not nearly as much cold air into the northern U.S. March 5-8 by seeing a weather system over southern Canada only providing a minor glancing blow,” according to NatGasWeather.

The U.S. Energy Information Agency reported weekly domestic nat gas supplies fell by a slightly less than expected 143B cf, but total stocks still stand at 2,200 trillion cf, up 637B cf from a year ago and 179B cf above the five-year average.

Among gas-focused equities, EQT +8.7% after its Q4 earnings results and a restructure of its Equitrans affiliates, but others closed lower: CHK -15.7% , AR -10.7% , GPOR -9.9% , SWN -7.8% , COG -7.8% , DNR -7.7% , CRK -3% , RRC -1.8% .

Mild winter sends U.S. natural gas prices tumbling

U.S. gas prices have fallen even further in recent weeks as the market tries to avert a glut by encouraging power producers to maximise gas combustion and switch away from coal. Warmer-than-normal temperatures over the last three weeks have been responsible for pushing prompt gas prices within a whisker of multi-year lows. (tmsnrt.rs/2T9gUQ0) Futures prices for gas delivered at Henry Hub in March 2020 fell to just $2.09 per million British thermal units on Jan. 2, the lowest since the contract started trading in 2008. Since then, prices for gas deliveries in March 2020 have risen slightly to $2.15, but they are down . (full story)

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Europe’s natural gas storage inventories record high

European natural gas storage inventories as of March 1, 2020, were 60 percent full—the highest ever recorded level for the start of March, the US Energy Information Administration (EIA) said referring to the Gas Storage Europe’s Aggregated Gas Storage Inventory (AGSI+).

“European stock levels for both January and February 2020 were the highest ever recorded for those months. Europe’s high levels of natural gas in storage are the result of a mild winter, which limited winter heating demand, and growing natural gas imports by pipeline and as liquefied natural gas (LNG),” said EIA.

Relatively mild winter weather across Europe—and especially in northern Europe, where natural gas heating is more common—reduced demand for residential and commercial heating, according to the report.

“As a result, natural gas withdrawals from storage were lower than average, resulting in record-high January and February inventory levels. Europe’s natural gas storage capacity utilization for the first day of March has typically been 38 percent, based on the previous five years; in 2020, natural gas stocks in Europe started March at 60 percent of capacity,” said EIA.

The report shows that high natural gas stocks were partly the result of record-high deliveries to Europe both by pipeline and as LNG in 2020.

“LNG imports into Europe had been relatively low between 2020 and mid-2020, but they increased substantially in 2020, averaging 11 billion cubic feet per day (Bcf/d) or almost twice the volume in the two previous years. LNG imports set monthly records of 14 Bcf/d in December 2020 and February 2020 (excluding re-exports, where a country imports and then exports LNG), implying a Europe-wide regasification capacity utilization of almost 60 percent,” said EIA.

“Russia and the United States increased LNG exports to Europe last year by an estimated 1.4 Bcf/d and 1.5 Bcf/d, respectively, compared with 2020. The United States has been the largest LNG supplier to Europe since November 2020, and in February 2020, LNG imports from the United States reached a new record high at 5.1 Bcf/d—nearly double the volume of Europe’s second-largest supplier, Qatar.”

Russian Natural Gas Monthly Price – US Dollars per Million Metric British Thermal Unit

Description: Natural Gas (Europe), average import border price and a spot price component, beginning April 2020 including UK; during June 2000 – March 2020 prices excludes UK.

Unit: US Dollars per Million Metric British Thermal Unit

See also: Commodities glossary – Definitions of terms used in commodity trading

Month Price Change
Sep 2020 4.21
Oct 2020 5.06 20.19 %
Nov 2020 5.15 1.78 %
Dec 2020 4.62 -10.29 %
Jan 2020 3.63 -21.43 %
Feb 2020 2.91 -19.83 %
Mar 2020 2.72 -6.53 %

Top Companies

Gazprom
Website: http://www.gazprom.com/
Location: Moscow, Russia
Estimated Production: 540 billion cubic meters (BCM) per year

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