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Natural gas hits 20-month low in $2 territory despite evolving cold

Commodities Jan 25, 2023 03:32PM ET
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By Barani Krishnan

Investing.com -- Relief isn’t on the horizon yet for bulls in natural gas, with the heating fuel trading in $2 territory on Wednesday after hitting 20-month lows despite evolving forecasts for cold in a winter dominated by unseasonable warmth.

The front-month March gas contract on NYMEX’s Henry Hub settled down 14.2 cents, or 4%, at $2.915 per mmBtu, or metric million British thermal units. It continued to plunge after the close, hitting a bottom of $2.876 -- its lowest since April 2021.

The action in gas futures “appears to be a repetitive theme lately, where prices will rally one day and then will sell off the next,” Gelber & Associates, a Houston-based energy markets trading consultancy, said in a note.

Wednesday’s downside action on the Henry Hub came “even though the market will soon be facing an early February winter blast and also amid news that the Freeport LNG export facility is slated to reopen soon,” analysts at Gelber added in the note.

“Even though NYMEX gas futures are overextended to the downside at this juncture…it appears that market bears remain firmly planted in the driver’s seat," the analysts said.

Houston, Texas-based Freeport, closed for months now, is stalling consumption of 2 bcf, or billion cubic feet, of gas per day. The natural gas liquefaction terminal is expected to resume operations by next month, with traders estimating that it could take weeks for LNG shipments to leave the terminal.

“If Freeport actually does manage to come online in February, thus tightening the supply/demand imbalances, then it could set the stage for a move back above $4.00/mmBtu within the next few weeks,” the Gelber note said.

On the flip side, European gas prices, benchmarked to the Netherlands TTF exchange, tumbled nearly 12% on Wednesday to close at a one-year low near $18.60 per mmBtu amid concerns that soon-to-be-increased LNG exports from the U.S. could land more gas in an already well-supplied European market.

Natural gas has lost more than 30% of its value since 2023 began, amid tepid heating demand in one of the warmest Northern Hemisphere winters in two decades.

From the start of this week though, forecasts showed the U.S.-based Global Forecast System and the European ECMWF weather model will bring greater Arctic wind intrusions to much of the United States, including gas production areas in Texas, Louisiana, and the Appalachian region, the Gelber note said.

Unlike the late December 2022 Arctic blast that plunged deep into Texas and Louisiana and featured very little, if any, ice or snow, the looming February winter event is threatening to usher in icy precipitation along with frigid temperatures.

That could potentially extend freeze-offs in oil and gas wells, depending on how much ice arrives.

“If and when the February Arctic blast comes to fruition, it’s not out of the question that NYMEX March 2023 gas futures prices could test the $3.75/MMBtu $4.00/MMBtu area soon,” Gelber’s analysts said in summation, adding that until the weather change and Freeport restart begin, “sellers may continue to pressure prices.”

Natural gas hits 20-month low in $2 territory despite evolving cold
 

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Comments (4)
Dalibor Balgac
Dalibor Balgac Jan 26, 2023 2:38AM ET
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GFS model this morning is utterly bearish ... weather is just disappointing for bulls and now February does not looks cold as it was expected... it might change as well but does not look good for bulls
John Balzarini
John Balzarini Jan 26, 2023 2:38AM ET
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Why don’t you shut off your eating
Bill Windle
Bill Windle Jan 25, 2023 8:46PM ET
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weather has already changed
Zaheer Khalfan
Zaheer Khalfan Jan 25, 2023 8:46PM ET
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Manipulation at its peak! Remember that even if hedge fund managers sell their NG contracts at a loss they are doubling or teipling their gain on the short ETF. They have total control. They play the psychological game with small investors by creating frustration, fear and panic
Ace JD
Ace JD Jan 25, 2023 8:46PM ET
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Zaheer Khalfan  Always manipulation when some rookie jerk loses money.
Sheevendra Pandey
Sheevendra Pandey Jan 25, 2023 8:46PM ET
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Ace JD You fool, what fundamental changes which cause drop from 7.5 $ to 2.7$ in one month.
John Balzarini
John Balzarini Jan 25, 2023 8:46PM ET
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Weather is bullish with with price st 2.75 , if price would be 6.0 $ + might be little bearish !!
Slabodan Milosevic
humanfallibility Jan 25, 2023 6:03PM ET
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'23 set the tone: SELL IT. Rates are going up next WEEK. If it sold off 30%/ should know the next major @50% is where a rally will attempt to pivot, that's $1.94; Freeport or not. Piss poor guidance in my opinion. recognize sub $2.00 prices are expected in 2023 as winter is almost over and US has once again Frac'd itself a gaseous expanse of fuel and then blew up part of its delivery system which will only slowly lower this record supply which is 5- 6 % over projected demand so far (IN WINTER!). $1.94 is likely before power burn can take this higher in a contracting economy with monetary policy exacerbating a recession all ready underway.'22 constraints have opposite affect on '23 as the rush to produce LNG hits the market from all ports just as demand wanes. Long-term NG will provide support as oil reserves drop. US dollar needs ng as $ comes under pressure from worlds economies who don't want bucks w/ nothin backin em but lying corrupt politicians owned by corps/war contractors
Zaheer Khalfan
Zaheer Khalfan Jan 25, 2023 1:44PM ET
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Good factual read. Another dissapointing day though. Looks like prices are being forced down through collaboration between the big player. They want to short NG down to the ground
Name Surname
Name Surname Jan 25, 2023 1:44PM ET
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yes and natgas will be given away for free. laugh.
Maks Mars
Maks Mars Jan 25, 2023 1:44PM ET
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cant go wrong keep selling with gaps 2.80 & 1.75 calling lol
Zaheer Khalfan
Zaheer Khalfan Jan 25, 2023 1:44PM ET
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They are going to bleed this to $1. Just plain crooks and thieves
Maks Mars
Maks Mars Jan 25, 2023 1:44PM ET
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Zaheer Khalfan sell until Ukraine winning the war never been so easy lol
 
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