NEW YORK: US natural gas futures dropped about 4% on Monday because the country has ample amounts of gas in storage and the coldest weather expected over the next week will likely hit over the long US Martin Luther King holiday weekend when many businesses and government offices are shut.
Analysts said there was currently about 12.2% more gas in storage than normal for this time of year.
Energy traders also said gas prices were depressed as some in the market sold all energy futures after oil futures plunged about 4% market when Saudi Arabia cut the price of crude it sells.
That gas price drop came even though next week’s extreme cold was expected to boost demand for the fuel to a daily record high on Martin Luther King Day on Monday, Jan. 15.
In addition to sky-high gas demand, extreme cold could cause production to drop by freezing oil and gas wells, pipes and other energy equipment, which the energy industry calls freeze-offs.
Front-month gas futures for February delivery on the New York Mercantile Exchange fell 12.4 cents, or 4.3%, to $2.769 per million British thermal units (mmBtu) at 10:31 a.m. EST (1531 GMT). On Friday, the contract closed at its highest since Nov. 22.
That put the contract down for the first time in five days and pushed it out of technically overbought territory for the first time in three days.
Even though the coldest part of winter was still coming, many traders said winter futures for November-March likely already peaked at $3.608 per mmBtu on Nov. 1 due primarily to recent record production and ample supplies of gas in storage.
Financial firm LSEG said average gas output in the Lower 48 US states fell to 107.7 billion cubic feet per day (bcfd) so far in January, down from a monthly record of 108.5 bcfd in December.
Meteorologists projected the weather across the country would remain mostly warmer than normal through Jan. 12 before turning colder than normal from Jan. 13-23.
As demand for the fuel for heating increases, LSEG forecast US gas demand in the Lower 48, including exports, would rise from 137.2 bcfd this week to 158.4 bcfd next week. The forecasts for this week and next were higher than LSEG’s outlook on Friday.
On a daily basis, total US gas demand, including exports, was on track to reach 169.2 bcfd on Jan. 15, according to LSEG’s latest forecasts.
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