Commodity Blog

Natural gas futures are cratering at the end of the trading week as the energy commodity is on track for a steep double-digit loss for the week. Natural gas prices are plunging mainly because the supply withdrawal fell short of projections and expectations of warmer-than-average temperatures for much of North America this winter.

January natural gas futures tumbled $0.09, or 3.55%, to $2.41 per million British thermal units (btu) at 12:32 GMT on Friday on the Comex division of the New York Mercantile Exchange. Natural gas prices are on track for a large weekly decline of 10.25%, lowering their year-to-date losses to 16%.

The energy source is poised for a 10.3% loss in November.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas decreased by 28 billion cubic feet for the week ending November 22. The market had penciled in a fall of 89 billion cubic feet. In total, supplies stand at 3.61 trillion cubic feet, up 548 billion cubic feet from the same time a year ago. They are also 31 billion cubic feet below the five-year average. This was the second consecutive week of supply declines.

Despite getting a slight lift from arctic temperatures that blanketed many parts of the US, a recent National Oceanic and Atmospheric Administration (NOAA) winter forecast suggests that much of the US will experience warmer-than-average temperatures. But there will be regions of the country that will endure typical winter temperatures from December to February: the northern Plains, the western Great Lakes, and the upper Mississippi Valley.

So, even with the cold temperatures in October and November, conditions will likely moderate. When you factor in surpluses in storage levels and immense domestic supplies, prices could potentially hover in the mid-$2 range over the next few months.

However, according to MarketWatch, there are some people betting on a colder-than-normal winter. Steven DiMartino, lead meteorologist at private forecasting firm Weather Concierge, expects winter temperatures similar to what happened this month, which will lead to natural gas demand to “spike as everyone turns on the heat, with this cold air on the way.”

Investors’ concerned were amplified by a Wall Street Journal report that suggested natural gas prices could slide to multi-year lows by March.

In other energy markets, January West Texas Intermediate (WTI) crude oil futures shed $0.12, or 0.21%, to $57.99 per barrel. February Brent crude futures slipped $0.37, or 0.57%, to $62.91 a barrel. January gasoline futures were flat at $1.67 a gallon. January heating oil futures dipped $0.005, or 0.25%, to $1.94 per gallon.

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