The benchmark for U.S. natural-gas suffered its biggest one-day decline since February 2014, mainly because of estimated supply glut caused by unnatural warm weather for this time of the year, according to The Wall Street Journal.
Above-average temperatures will undercut demand, making natural-gas stockpiles add up to a near record high reserve. “The market is now in absolute free fall. There’s no real strong forecast for any weather-[related] demand in the near future.”, said Stephen Schork, editor of energy-trading newsletter The Schork Report, quoted by the same source.
The situation is not surprising, as companies continue to grow more efficient at extracting the fuel from shale rocks in Pennsylvania, Texas or other zones, therefore maintaining increased production even though prices are going down the hill. Producers’ struggle with low natural-gas prices over the last three years may not be the only threat: past year’s plunge in oil prices is also affecting energy producers.
Many experts presume that both oil and natural-gas prices to remain low through the end of 2015 and into 2016, so the situation isn’t going to change pretty soon.
Is it common for natural-gas prices to move up during the winter, but weather forecasts released Sunday night predicted two weeks with above-average temperatures, meaning that the demand will “freeze” for now. Analysts say producers could keep adding to storage into November this year, sparking concerns that storage facilities could near capacity if inventories continue to rise. As of Oct. 16, inventories stood at 3.814 trillion cubic feet, 4.5% above the five-year average level for that time of year, according to the source specified earlier.
On the other side, some people will welcome this news with open arms, as household consumers will continue to benefit of low natural-gas prices.