US natgas slumps to 6-month lows on weak demand, high stocks
Quantum Commodity Intelligence – Benchmark US natural gas prices were languishing at around six-month lows Tuesday as seasonally mild weather staved off winter heating demand in many states, adding to the already bloated storage levels.
The front-month Jan24 Henry Hub contract on NYMEX was trading around 2% lower late morning Eastern time at $2.373/mmBtu, the weakest front-line price since June.
The Jan 24 contract had reached almost $4/mmBtu in the first week of November with the onset of winter, but low demand, along with record production levels and bloated inventories, have crashed the market.
The Jan24 contract is also at an 18-month low, having peaked around $10/mmBtu in summer 2022.
"In the US warm temperatures are killing the natural gas market. Natural gas is facing record production in the winter that seems to be delayed as warm fronts are taking over big parts of the nation," said Phil Flynn of The Price Futures Group, noting that the Energy Information Administration (EIA) is reporting that the US starts the winter with the most natural gas in storage since 2020.
The EIA report revealed that working natural gas in storage in the Lower 48 states ended the natural gas injection season at 3,776 billion cubic feet (Bcf).
"In addition, we now have 5% more natural gas in US inventories entering the winter heating season than the previous five-year (2018–22) average, and 7% more than last October 31," commented Flynn.
Exports
The massive domestic supply has also offset the near-record LNG exports seen in November and possible record exports over winter. According to the EIA, US exports last month were 8 million mt, the second highest on record.
Henry Hub prices were also softer down the forward curve, with contracts in the low-demand Mar24 and April24 months dropping below $2.18/mmBtu. Prices recover to above $2.50/mmBtu on the Jul24 contract, coinciding with the summer-peak season.
European natural gas prices also slumped to fresh three-month lows as mild winter temperatures continue to crunch heating demand, while industrial offtakes remain low.
Benchmark TTF futures for Jan24 were around 3.5% lower on the day, dipping below €35/MWh, whereas the same contract had been pushing €50/MWh during the first half of November.
"European gas extended last week's declines amid ongoing weakness in demand. North Asia LNG prices also edged lower as strong inventory levels limit demand in the spot market," said ANZ commodity strategist Daniel Hynes, noting the broader market malaise was also hitting Asian markets as JKM eased to around $15/mmBtu on a spot basis.