Natural gas is trading like it’s 1999.
Gas prices are slumping amid record-breaking warm temperatures in the eastern U.S. Gas futures for January delivery fell 7.2 cents, or 3.8 percent, to $1.822 per million British thermal units on the New York Mercantile Exchange Tuesday, the lowest settlement since March 24, 1999. Futures are down 37 percent this year, heading for the biggest annual decline since 2006.
Unless a deep freeze blankets the northern half of the U.S., the country will remain awash in gas well into next year, keeping prices low. Banks including Credit Suisse and Barclays are cutting price estimates as output from the Marcellus and Utica shale basins outpaces demand for the heating fuel. Temperatures in New York reached 67 degrees on Sunday, beating a record for the date set in 1923.
“It’s getting a little too late for cold weather to rescue the gas market,” said Walter Zimmermann, chief technical analyst at brokerage United-ICAP in Jersey City, New Jersey. “There’s just so much supply in storage.”
Temperatures will be above normal across the eastern U.S. through Dec. 29, said MDA Weather Services.
Gas has been one of the worst-performing commodities this year as the mild weather limits heating demand and leaves the biggest stockpile surplus since 2012 intact. Production from the Marcellus and Utica shale formations is pushing U.S. output toward a fifth straight annual record, even as futures drop.
“The weather situation is just incredibly bearish and it’s not going to disappear,” said Bob Yawger, director of the futures division at Mizuho Securities. “You’re not going to see a big storage draw, you’re not going to get a lot of demand.”
Natural gas inventories probably slid by 43 billion cubic feet in the week ended Dec. 11, compared with the five-year average decline of 120 billion for the period, based on the median of seven analyst estimates compiled by Bloomberg. Stockpiles totaled 3.88 trillion cubic feet as of Dec. 4, 6.5 percent above the norm.
Gas production will rise 6.3 percent to a record 79.58 billion cubic feet a day this year, according to the U.S. Energy Information Administration.