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The U.S. benchmark natural gas price plunged on Tuesday by as much as 10% to the lowest level since September 2020 due to milder weather and consequently lower demand.
After Tuesday’s slump, the gas price at the Henry Hub fell to around $2.043 per million British thermal units (MMBtu) early on Wednesday, down by 1.59%.
The plunge in prices has been significant in recent weeks due to a mild start to January, consistently high supply, and the outage at the Freeport LNG export facility.
Mild weather and high production continue to weigh on the benchmark U.S. natural gas prices, which are now down by $6 per MMBtu compared to the middle of December and by more than $9 per MMBtu from August 2022. The crash from August and February is nearly 80%.
Last week’s Weekly Natural Gas Storage Report by the EIA showed that stocks of working gas in storage were 328 Bcf higher than last year at this time and 183 Bcf above the five-year average.
The price slide can also be attributed to the imminent expiration of the front-month contract on February 24.
The technical outlook for natural gas prices is “strongly bearish,” EBW Analytics Group analyst Eli Rubin told Natural Gas Intelligence earlier this week. Last Friday, prices dropped below the “critical technical support” at the $2.35 per MMBtu level, Rubin noted.
“Although the breakdown of technical support opens the door to notable further losses for natural gas, solidifying fundamentals may offer support after the March contract rolls off the board and April becomes the front-month contract,” Rubin told Natural Gas Intelligence.
In its Short-Term Energy Outlook (STEO) for February, the Energy Information Administration slashed its Henry Hub spot price forecast by 30% to $3.40 per MMBtu for 2023, down from $4.90 per MMBtu in the January forecast. The Henry Hub natural gas price averaged $6.42 per MMBtu last year.
By Michael Kern for Oilprice.com
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Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com,