Breaking News
Get 40% Off 0
Is NVDA a 🟢 buy or 🔴 sell? Unlock Now

Natural Gas: Winter's Early Bite Fails to Ignite Prices - Are New Lows Looming?

By Investing.com (Damian Nowiszewski)CommoditiesDec 07, 2023 03:28AM ET
www.investing.com/analysis/natural-gas-winters-early-bite-fails-to-ignite-prices--are-new-lows-looming-200644196
Natural Gas: Winter's Early Bite Fails to Ignite Prices - Are New Lows Looming?
By Investing.com (Damian Nowiszewski)   |  Dec 07, 2023 03:28AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
NG
-8.66%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
TFAc1
+1.10%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • Low temperatures in Europe in early December have failed to boost natural gas prices
  • Inventories in Europe and the US remain at high levels
  • Could this mean natural gas prices are set to plummet even lower?
  • Missed out on Black Friday? Secure your up to 60% discount on InvestingPro subscriptions with our extended Cyber Monday sale.

Lower-than-expected temperatures in the global north during early December and late November have raised eyebrows. This occurrence is particularly rare, especially in light of the ongoing global warming issues as temperatures this low aren't expected so early in the heating season.

Despite this, prices for one of the key energy commodities natural gas have remained in a downtrend since early November, breaking below $3 for the Henry Hub contract recently.

This shows that Europe in particular, which was heavily dependent on supplies from Russia even before the outbreak of the war, managed to get through the crisis without facing a sharp shortage.

Europe Well Prepared for Heating Season With High Natural Gas Storage Stocks

The last several days have been marked by the onslaught of winter weather, causing temperatures in northern Europe to reach several degrees below zero at night. Fortunately for the economy, this does not have a major impact on natural gas prices.

This is mainly due to the high storage levels in Europe, which are currently filled to an average of 96%, and the efficient organization of supplies from alternative directions to the East.

Additionally favoring the supply side are temperature forecasts that anticipate warming in the second half of December.

Simultaneously, there is a notable decline in economic activity, especially in the eurozone, where GDP is teetering on the brink of recession. The realization of this economic downturn is anticipated in the first quarters of 2024.

The scale of the challenge facing Europe is shown by a chart of Dutch TTF gas prices, which at their peak in August 2022 reached nearly 340 euro and MMBtu (the key storage replenishment period) to fall below 30 euro by the middle of this year.

Asia and Europe Are Also Experiencing Declines in Natural Gas Prices

Declines in natural gas prices are also noticeable in Asia and the United States. Despite the challenges posed by relatively low temperatures in China, Japan, and South Korea, similar to Europe, natural gas prices have demonstrated resilience to significant increases.

This resilience can be attributed to the combination of high storage levels and forecasts predicting a warm winter, creating a scenario that is expected to exert downward pressure on prices.

The current level of U.S. natural gas production at 119.4 billion Bcf at the end of November and the common denominator of high storage stocks are enough to secure the U.S. economy during the heating season.

Natural gas reserves totaled 3836 Bcf in November, which is 9% higher than the average of the past five years.

Natural Gas Spot Prices
Natural Gas Spot Prices

Source: eia.gov

Dutch TTF Contract: Technical View

As part of the current downward momentum, the valuation of Dutch TTF natural gas contracts remains below EUR 40 MMBtu and is currently testing the demand zone located in the EUR 38 price area.

Dutch TTF NG Daily Chart
Dutch TTF NG Daily Chart

If sellers manage to break out of the indicated region, the way opens for a renewed attack on the round EUR 30 barrier. The main target for supply, however, is the low forming in the area of EUR 23 from the turn of May and June this year.

The success of this scenario hinges on the accuracy of weather predictions. If the forecasts of a warm winter materialize, there is a good chance of a retest or even a breakdown below this year's lows in natural gas prices.

***

You can easily determine whether a company is suitable for your risk profile by conducting a detailed fundamental analysis on InvestingPro according to your criteria. This way, you will get highly professional help in shaping your portfolio.

In addition, you can sign up for InvestingPro, one of the most comprehensive platforms in the market for portfolio management and fundamental analysis, much cheaper with the biggest discount of the year (up to 60%), by taking advantage of our extended Cyber Monday deal.

Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

Natural Gas: Winter's Early Bite Fails to Ignite Prices - Are New Lows Looming?
 

Related Articles

Anna Radomska
Natural Gas – Double Bottom or… By Anna Radomska - Feb 23, 2024 1

Although natural gas bounced off the previous lows, the risk of another downswing has not decreased. Why?Will the pattern return?The last few weeks have not been good for the...

Natural Gas: Winter's Early Bite Fails to Ignite Prices - Are New Lows Looming?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
roy reap
roy reap Dec 07, 2023 4:55PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
🤡🤡🤡🤡🤡🤡🤡🤡🤡article
Phong Nguyen
Phong Nguyen Dec 07, 2023 12:23PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
You’re so wrong on your guess !!! You still have a lot to learn. The answer to be seen in coming days, weeks.
Omsingh Chauhan
Omsingh Chauhan Dec 07, 2023 7:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
hello sir
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email