Natural Gas Crashes 4% on Warmer Weather, Returning Output

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Natural gas futures are cratering to kick off the trading week, following last week’s 6% gain. The so-called bridge fuel is falling on warmer weather forecasts and renewed production efforts after the blast of wintry conditions since the middle of February. How much lower can the selloff go in the natural gas market?

March natural gas futures plunged $0.12, or 3.91%, to $2.949 per million British thermal units (btu) at 18:39 GMT on Monday on the New York Mercantile Exchange. Despite the slump over the last two trading sessions, the energy commodity is still up 16% year-to-date. Over the previous 12 months, natural gas has rallied 60%.

It has been a tumultuous month of February for natural gas prices. After briefly hitting the $3.30 mark last week, prices have been in freefall, sliding to as low as $2.88.

As expected, temperatures are beginning to warm up as February winds down. And, based on the recent weather models, the early patterns suggest a warmer than normal March. Overall, the Arctic air has diminished, leaving investors to concentrate on production.

There had been some initial and brief worries over output amid freezing temperatures and heavy snowfall. But the data and reports across the US suggest that production is coming back online relatively quickly. Still, market analysts do anticipate some tightness in the market, which Canadian imports have somewhat alleviated in recent sessions.

What does this mean for the upcoming Energy Information Administration (EIA) supply report? Following last week’s deep freeze, industry observers believe that there could be a massive storage withdrawal that could trigger substantial price movements. Early estimates are suggesting domestic withdrawal could top 300 billion cubic feet in the week ending February 19.

In other energy commodities, March West Texas Intermediate (WTI) crude oil futures spiked $2.27, or 3.83%, to $61.53 per barrel. April Brent crude futures added $1.33, or 2.11%, to $64.24 a barrel. March gasoline futures picked up $0.0401, or 2.11%, to $1.9290 per gallon. March heating oil futures surged $0.0402, or 2.22%, to $1.8507 a gallon.

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