Spot prices for natural gas fell sharply on Friday as forecasts for warm weather spooked traders who were hoping for increased demand heading into what is normally cold season in the United States.
Natural gas prices were trading down
7.52% on Friday afternoon at $2.313. And the loss wasn’t just on Friday.
Natural gas prices started out at $2.738 on Sunday - a loss of 15.5% for the
week.
It’s typical this time of
year for natural gas inventories to start to draw down as cold weather sets in,
but the National Weather Service is calling for likely above-average
temperatures in most of the country over the next 6-12 days, and traders fear
that not enough of a drawdown will be realized, continuing the glut and
therefore lower natural gas prices.
As a result of what some see as moderately warmer weather in the
short term, US demand is expected to increase only to 104.7 Bcf/d over the same
timeframe, compared with US natural gas production that is expected to hover
around 92.7 Bcf/d—a 6% increase over year-ago levels, according to S&P Global Platts.
Forecasts aside, the EIA has estimated that total natural gas
use actually fell 5% compared to the
previous week, with natural gas use for power consumption declining even more,
by 7%. Exports of natural gas to Mexico was flat week on week.
But the net withdrawal from
working gas for the week ending November 15 - the latest data available from
the EIA - totaled 94 Bcf, which brings the total working natural gas stocks to
3,683 Bcf. This is 16% more than a year ago.
Natural gas prices are down
sharply year on year, with prices as of November 30, 2018, sitting at $4.339, a
loss of $2.026 or 47% y/y.