Commodity Wrap: US natural gas slides 10% on demand slump

US natural gas

US natural gas prices slumped more than 10 percent overnight on December 12 amid high inventories and forecasts of a warmer-than-usual weather, which suggests lighter demand for space heating. US natural gas prices were down 28 percent on-month and 64 percent on-year as it crashed to a six-month low amid record high US domestic gas production.

As of 9:24am ET on Monday, December 11, the front-month futures at the Henry Hub, the American benchmark, were trading down 10.50 percent at $2.305 per million British thermal units (MMBtu). Prices are now at their lowest level since the start of the summer.

“The weekend data failed to trend any colder with the setup through December 26, suggesting warmer-than-normal temperatures and lighter-than-normal demand will continue through the end of the month,” according to a report by NatGasWeather.com cited by The Wall Street Journal.

The US is entering the heating season with the highest natural gas in storage since 2020, the US Energy Information Administration (EIA) had said last week. US inventories were 7.3 percent higher on-year and 6.5 percent above the five-year average. The high natural gas inventories are partially the result of a milder 2022-23 winter and weaker heating demand, which allowed working natural gas inventories to total 1,823 Bcf on April 1, 2023 — the end of the previous heating season.

This was 19 percent higher than the average US April 1 total for the previous five years, according to a report.

Europe gas price for January is pegged lower than April, while Panama congestion posts no supply risk, as orders are filled by third-party supplies. Multiple reports suggest that there will be an LNG surplus till 2025 on higher supplies.

Elsewhere, China crude import from Saudi Arabia is at a five-month low and the OPEC monthly report is due on December 13.

US Inflation data is expected later on December 12, while the US Fed meeting announcement is scheduled for December 13.