Natural gas bounces at mid-$2 as selling pauses amid market inflection

By Barani Krishnan

Investing.com -- The selloff in natural gas paused on Tuesday as the market appeared to be at an inflection after a two-month-long plunge, with analysts saying the trade needs more conviction about demand to send prices of the heating fuel meaningfully higher.

“Even though there are some chilly temperatures likely to emerge throughout the lower 48 states over the course of the next few weeks, the market appears to be more frequently focused on multiple bearish price-setting mechanisms and the fact that seasonal ‘climatology’ will soon be setting in as springtime approaches,” Houston-based energy markets consultancy Gelber&Associates said.

“This means that the widespread late-season cold possibly emerging in the latter part of February and/or early March is not the same intensely frigid conditions typically seen during the heart of the winter season in December and January. Therefore, gas market players may shrug off any further Arctic intrusions for the remainder of the winter, particularly since they will be so short-lived.”

The front-month March gas contract on the New York Mercantile Exchange’s Henry Hub settled up 16.2 cents, or 6.7%, at $2.5670 per mmBtu, or million metric British thermal units.

Just a day ago, March gas fell to $2.376, the lowest for a front-month gas contract on the Henry Hub since Sept. 28, 2020, when the benchmark contract then went down to $2.02.

An unusually warm start to the 2022/23 winter season has led to considerably less heating demand in the United States versus the norm, leaving more gas in storage than initially thought.

At the close of the week to Feb. 3, U.S. gas-in-storage stood at 2.366 tcf, or trillion cubic feet, up 10.9% from the year-ago level of 2.133 tcf, data from the EIA, or Energy Information Administration, showed.

This is despite utilities drawing a higher-than-forecast 217 bcf, or billion cubic feet, from storage for heating and electricity generation last week, the EIA said.

The agency’s next update on storage, for the week to Feb. 10, is due on Feb. 16.

Responding to this winter’s warmth and lackluster storage draws, gas prices plunged from a 14-year high of $10 per mmBtu in August, reaching $7 in December and mid-$2 levels this month amid forecasts for bitter cold here and there.