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Natural Gas Hits Lowest February Price In Two Decades

Gas flame

Warmer winter weather this year has reduced U.S. natural gas demand for heating, and as production growth continues to exceed demand growth, U.S. natural gas prices slumped this month to their lowest February levels in two decades, the Energy Information Administration (EIA) said on Friday.

Natural gas prices at the Henry Hub benchmark closed at $1.77 per million British thermal units (MMBtu) on Monday, February 10. This was the lowest closing price for a day in February since at least 2001, according to Bloomberg and FRED data compiled by the EIA. The $1.77 per MMBtu price was also the lowest price in any month in nearly four years—since early March 2016.   

Natural gas prices dipped to below US$2 per MMBtu this January for the first time in almost four years. This winter season, the glut is further aggravated by higher gas production in the Permian, higher than normal inventories, and warmer weather so far this winter.  

As natural gas production outpaces demand growth, less gas has been withdrawn from underground storage this winter, the EIA said.

This winter’s heating season began with the third-lowest level of natural gas inventory in a decade. But by mid-January, inventories had already reached relatively high levels for the middle of the winter, according to EIA estimates.

The latest Weekly Natural Gas Storage Report showed that as of February 7, working gas in storage stocks were 601 Bcf higher than this time last year and 215 Bcf above the five-year average.

January 2020 was the fifth warmest January on record, according to the 126-year climate record of the National Oceanic and Atmospheric Administration (NOAA).

In its February Short-Term Energy Outlook (STEO) from earlier this week, EIA expects Henry Hub prices will remain below $2.00/MMBtu in February and March. Prices are seen rising in Q2, with lower U.S. natural gas production and higher demand for natural gas-fired power generation.

For full year 2020, EIA forecasts that Henry Hub natural gas spot prices will average $2.21/MMBtu, and then rise to an annual average of $2.53/MMBtu next year.  

By Tsvetana Paraskova for Oilprice.com

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