Natural gas futures are cratering on toward the end of the final trading week of 2021, despite the supply drawdown coming in greater than what the market had anticipated. Natural gas has quite the year, although it has cut its year-to-date gain in almost half. Can the energy commodity remain above $3.50 to finish 2021?
January natural gas futures plunged $0.484, or 12.03%, to $3.543 per million British thermal units (btu) at 16:40 GMT on Thursday on the New York Mercantile Exchange. Natural gas will finish the year with a 40% gain, although it was as high as 105% on the year.
According to the US Energy Information Administration (EIA), domestic inventories of natural gas declined 136 billion cubic feet in the week ending December 24. The market had predicted a supply withdrawal of 125 billion cubic feet.
In total, US supplies stand at 3.226 trillion cubic feet, down 250 billion cubic feet from the same time a year ago. They are also within the five-year historical range.
Market analysts say that investors will be paying close attention to the January 8 to January 12 period for weather conditions. This, they say, is typically when there is strong demand, especially in the northern and eastern part of the United States.
But they note that it is hard to determine if bulls are optimistic about this period. While they increased the February 2022 contract price to more than $4, there was a sharp selloff right after.
Meanwhile, industry observers note that it is more than likely that cold temperatures will be widespread next month. However, unlike last year, supply risks are unlikely to weigh on the overall natural gas market.
The consensus is that natural gas prices will witness limited upward price movement throughout the first quarter of 2022.
In other sector news, liquefied natural gas (LNG) exports has come into focus, particularly Asian demand and output from the Nord Stream 2 after its approval in the first half of next year.
In other energy commodities, February West Texas Intermediate (WTI) crude oil futures rose $0.21, or 0.27%, to $76.80 per barrel. March Brent crude futures advanced $0.28, or 0.35%, to $79.49 a barrel. February gasoline futures edged up $0.01, or 0.45%, to $2.2765 per gallon. February heating oil futures jumped $0.0101, or 0.43%, to $2.3774 a gallon.