Natural gas tumbles beneath $4 as warm January takes hold of U.S.

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By Barani Krishnan

AiVIF.com -- The gas bull just can’t seem to catch a break, even with the New Year here, as a warmer January portends for the United States after an already mixed 2022/23 winter start for the primary heating fuel.

Natural gas futures on the New York Mercantile Exchange’s Henry Hub continued their journey into the abyss of low pricing Tuesday, breaking the key $4 per mmBtu, or metric million British thermal units, support that took 11% off the market on the first trading day of 2023.

The jaw-dropping plunge has left “natty”, as it’s known in the trade, down 40% from its December peak of above $7 and 60% below the August high of over $10.

“NYMEX front-month natural gas futures are kicking off the New Year in notably bearish territory,” Houston-based energy markets consultancy Gelber & Associates said in a note on natural gas.

“After the bitterly cold late December winter event, the Polar-chilled jet stream quickly transitioned to a high-pressure ridge, which the major weather forecast models, including the (U.S.) Global Forecast System (GFS) and the European (system) (ECMWF), suggest will be stubbornly footed in place through at least mid-January and will crater demand.”

Natty managed to finish 2022 up by 22% — as ironic as that seems — as bulls played on the psyche of a market caught undersupplied in an extreme winter. Neither of those two superlatives came to fruition — storage of U.S. natural gas ended 2022 little changed from 2021 closing levels while the 2022/23 winter has mostly felt like an extension of autumn, albeit a little warmer.

Europe's wholesale natural gas prices also fell Monday to their lowest level since their record highs after Russia invaded Ukraine in late February 2022.

A mild winter has enabled European Union countries to tap less gas from stocks that were built up in anticipation of cuts in supplies from Russia, which was the E.U.’s main supplier before the war.

The benchmark  European gas contract — Dutch TTF gas futures for the coming month — soared to a record $367 per megawatt-hour in March and was as high as $364 in August. On Monday, it hit $77 — 50% down from a month ago and the lowest level since before the war on February 21.