Natural-gas prices at lowest since 2020 on mild weather, ample supply ‘double whammy’

The front-month March natural-gas futures contract
NGH24,
-5.88%
fell 10.3 cents, or 5.8%, to $1.665 per million British thermal units on the New York Mercantile Exchange, poised for the lowest finish since July 20, 2020, according to Dow Jones Market Data.  

Prices are down a sixth consecutive session — the longest daily losing streak since the eight-day session that ended Oct. 20, 2023.

“As the risk associated with winter recedes more rapidly than a snowman in a heatwave, prices have experienced a significant decline, particularly for near-term contracts,” said Brian Swan, senior commodity analyst at Schneider Electric, in a daily note. Natural-gas futures through the May contract traded below $2.

“During this time of year, weather forecasts tend to exert more influence over the market than Wall Street,” with most seven- to 10-day models predicting warmer-than-normal conditions across most of the country, said Swan.

This likely “implies that we’ll observe smaller withdrawals from storage, leading to a surplus to the five-year average that is beginning to appear quite substantial,” he said.

Last week, the Energy Information Administration reported a net draw of 75 billion cubic feet, which “aligned perfectly with market expectations but was significantly smaller than the five-year average for this time of year,” said Swan.

That contributed to the surplus to the five-year average swelling to just over 10% — “approximately double where it was the previous week after colder January weather threatened to align inventories with seasonal norms,” he said.

The EIA will issue its weekly update on natural-gas supplies in storage on Thursday morning.