U.S. natural gas futures rebounded after crashing to their lowest levels in nearly four years ahead of the March contract expiry on Tuesday, as excess inventories and near-record levels of output flooded the market overwhelmed by milder temperatures.
Front-month gas futures for March delivery was up 1.5% at $1.68 per million British thermal units after dropping to as low as $1.511 earlier in the session, its weakest level since June 2020.
Prices were pressured, as “the market fundamentally is coming out of the winter at much higher storage levels than what we had anticipated. It’s been a very warm November through March, so weather related natural gas demand is lower, which allowed for larger storage,” said Robert DiDona of Energy Ventures Analysis.
Financial company LSEG said gas output in the U.S. Lower 48 states has risen to an average of 105.5 billion cubic feet per day (bcfd) so far in February from 102.1 bcfd in January, still shy of the monthly record of 106.3 bcfd in December.
Last week, prices soared about 13% after Chesapeake Energy, soon to be the biggest U.S. gas producer after its merger with Southwestern Energy, cut planned production for 2024 by roughly 30% after a recent plunge in prices.
DiDona noted that prices were also finding support from hot weather in the south, “even though it’s technically February, we shouldn’t be talking about cooling degree days, but there are some spots in the country that have very high temperatures that could actually be looking at cooling degree demand.”
Natural gas prices have plunged more than 32% so far this year, hurt by a mild winter that has left stockpiles well above normal, while output remained near record levels despite an Arctic freeze in January that briefly cut output and sent gas demand to a record high.
The European benchmark wholesale gas price eased on Tuesday after posting moderate gains in the previous session, with plentiful supplies and milder weather set to sap demand.
Qatar’s planned expansion of liquefied natural gas (LNG) production could see it control nearly 25% share of the global market by 2030 and squeeze out rival projects including in the United States where President Biden paused new export approvals, market experts say.
(Reporting by Anjana Anil in Bengaluru)