In the absence of cold weather propping up heating demand, the natural gas surplus will keep pressure on prices, especially as production from the booming shale oil industry continues to augment supplies.
Looking ahead, some energy observers argue that natural gas prices could retreat below the $2 level. For instance, Beth Sewell, managing partner at Quantum Power & Gas Services, believes natural gas could dip to $1.5 as the market enters the “spring shoulder period” – the transition period when heating demand drops and demand for fuel has yet to rise on summer cooling, reports Myra P. Saefong for MarketWatch.
Natgas production, which hit a fifth consecutive annual record last year, continues to rise, despite the rig count dipping to its lowest ever. The U.S. Energy Information Administration revealed bigger-than-expected 211 billion cubic-foot drop in natural gas inventories for the week ended January 22, but total inventories were at 3.086 trillion cubic feet or 432 billion cubic feet above the five-year average.
“Despite very low prices for natgas, U.S. shale gas production remains more than capable of overtaking demand, leading to more and more rounds of surpluses,” in the long term, Richard Hastings, macro strategist at Seaport Global Securities, told MarketWatch.
United States Natural Gas Fund
Max Chen contributed to this article.