Natural Gas Plummeting to Lowest Level in Months
Natural gas futures are much lower Thursday than they were a few weeks ago, continuing a lengthy downtrend.
Quick overview
- Natural gas prices in the U.S. dropped to $3.10/MMBtu, nearing a 13-week low due to diminished demand during an unusually warm winter.
- Low LNG export flows and minimal withdrawals contributed to the decline in natural gas futures, with only 71 billion cubic feet withdrawn last week.
- Despite current low prices, colder weather is forecasted for late January, which may increase demand and provide investment opportunities.
- Natural gas output is at historic levels, but demand is expected to decrease as production ramps up, creating a potential market shift.
The price of natural gas in the United States nearly hit a 13-week low on Thursday, dropping to $3.10/MMBtu and indicated that demand has diminished during this warm winter.
Natural gas futures are down, and the blame must be spread among the warm forecast, low demand, and minimal withdrawals. The market expected significant gas withdrawals last week, but reports show just 71 billion cubic feet were taken out.
Thursday’s price point marks one of the lowest rates for natural gas in months- back to mid-October levels. Distributors are attributing this partly to low LNG export plant flows, which were also low when we reported on natural gas earlier in the week. As the demand for U.S. gas dips, investors are struggling with a rate they hope will not drop much lower before things improve.
Why Now May Be the Perfect Time to Invest in LNG
Gas prices for the United States should be rising soon. Colder weather has been forecast for the coming weeks, with some of the coldest weather predicted from around January 29th and beyond. Yet demand for next week has been modified from previous predictions and is now lower than before, despite colder weather expectations.
Output for natural gas is extremely elevated, reaching historic levels right now and should go even higher. On Tuesday, the Short-Term Energy Outlook from the U.S. Energy Information Administration said that later in the year output will reach record setting levels. However, they cautioned that demand will decrease as that output ramps up.
In 2025, a record 91.5 bcfd was consumed domestically, and that is expected to decrease to 90.3 bcfd in 2026 and then climb slightly the following year. Demand for January is expected to be higher than it was in December, though, as the coldest part of the winter starts up, with even higher demand anticipated for February.
Because this winter has been unseasonably warm, the market is in for a shortened winter period that is likely to result in less gas consumption than normal. However short-term investors may do well by buying while the price is low and then selling in February while demand is at its peak. Repeated weather forecasts lately have pointed to cold fronts and increased winter conditions for the coming weeks that will make the market ripe for investors.
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