Natural Gas Extends Losses Despite Enormous US Supply Drawdown

Natural gas futures are plummeting again on Thursday, despite the US government reporting a larger-than-expected domestic withdrawal. Despite a strong start to 2022, the energy commodity has slumped close to 9% this week. What is driving this decline?

March natural gas futures plunged $0.195, or 5.07%, to $3.65 per million British thermal units (btu) at 18:48 GMT on Thursday on the New York Mercantile Exchange. Natural gas prices are up only 2% year-to-date.

According to the US Energy Information Administration (EIA), domestic inventories fell 206 billion cubic feet in the week ending January 14, higher than the median estimate of 194 billion cubic feet. This is also larger than last week’s drawdown of 179 billion cubic feet.

In total, US natural gas supplies stand at 2.81 trillion cubic feet, down 226 billion cubic feet from the same time a year ago. This is also 33 billion cubic feet above the same time a year ago.

Market analysts are anticipating drawdowns of more than 200 billion cubic feet for the next several weeks, especially if the cold weather persists throughout the United States. Experts note that the sharp withdrawal was attributed to output declines due to the freeze-offs that left many outlets temporarily offline.

natural gas pipeline in winterFor now, industry observers note that there is not much justification for prices to slide any further moving forward. Unless February is warmer than what the weather models are forecasting, natural gas prices should rise higher based on the fundamentals.

“We still are on pace for the coldest January since 2014, just with less intensity, and more likely to be followed by a February warm-up,” Bespoke Weather Services said in a statement.

In other energy commodities, February West Texas Intermediate (WTI) crude oil futures tumbled $0.35, or 0.41%, to $85.45 per barrel. March Brent crude futures shed $0.21, or 0.24%, to $88.22 a barrel. February gasoline futures were flat at $2.4584 per gallon. February heating oil futures erased $0.0119, or 0.45%, to $2.6245 a gallon.

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