Written by Shin Yi Ong and Julian Hast
U.S. natural gas fell for a second session on forecasts of warmer temperatures across much of the country, likely reducing demand for the fuel for heating and power plants.
Futures for March delivery fell as much as 9.1% to $3.111 per million British thermal units. Much of the cold air that hit the Northeast is now in the rearview mirror, with the Midwest and southern U.S. expected to experience warmer-than-normal temperatures through February 18, according to private forecasting firm Commodity Weather Group.
Prices fell 2.5% on Friday, ending a three-day rise after Baker Hughes’ weekly report showed a significant increase in drilling volumes in the Haynesville Shale region of northwest Louisiana and east Texas. An increase in rig counts typically indicates a subsequent increase in supply, which can put pressure on prices in the short term.
At the same time, the impact on short-term supply and demand fundamentals from the large increase in rig counts “appears to be overkill,” Eli Rubin, senior energy analyst at EBW Analytics Group, said in a note to clients on Monday. This is because the large increase may reflect Baker Hughes catching up with the actual rig count, Rubin added. Additionally, he said, “no new rig additions will be introduced within a frigid week” so March gas supplies may not be affected, despite the resulting reduction in March contracts.
U.S. natural gas prices soared to their highest level in three years late last month as cold weather increased demand and some supply disruptions. Futures have since unwound all of these gains.
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