Natural Gas Futures Hit Lowest Price in 10 Months
The energy crisis is taking on new meaning for natural gas futures traders: It’s a crisis of falling prices.
Natural gas futures plunged almost 6% to a 10-month low Tuesday on speculation that growing U.S. inventories will help power plants meet summer demand for air-conditioning.
Gas futures for June delivery slumped 23.5 cents, or 5.9%, to $3.738 per million British thermal units on the New York Mercantile Exchange, the lowest closing price since July 25.
But whether the continuing price decline on futures markets will help California’s energy crisis in the near term isn’t clear. Limited pipelines into the state, and complex pricing formulas allowed under industry deregulation, have sent prices soaring for gas imported to California, even as prices in other areas of the country have fallen.
California officials have accused pipeline operators of gouging. The companies deny the allegations.
For the gas industry overall, the supply situation looks far different now than a few months ago.
Utilities have been pumping gas into storage during the last seven weeks at a rate that’s three times faster than in the same period a year ago. New York gas futures prices have fallen 28% since March 31 on expectations that supplies this summer now will be sufficient to meet demand from most electricity generators while still allowing utilities to add enough to stockpiles for next winter.
“They’ve been injecting gas much better than they were last year, and right now, there’s not as much of a fear of supplies running short over the summer,” said Dan Hoppenwasser, a broker at Intermarket Brokerage in New York.
Prices are down 63% from a record $10.10 per million BTU on Dec. 27, when fears of winter shortages sent prices soaring.
Prices also are 14% lower than a year ago.
Record levels of drilling in the last year have helped natural gas producers increase output from U.S. wells, while high prices and a slowing economy have reduced demand from U.S. manufacturers, traders said.
Also, mild spring weather in much of the country has limited demand for gas to run heaters and to power air-conditioners, allowing utilities to buy more of the fuel to store for next winter.
While U.S. natural gas inventories are still 3% below year-ago levels, that deficit has narrowed from 39% at the end of March, according to the American Gas Assn.
Analysts expect an AGA report today to show supplies rose by 109 billion cubic feet last week, according to a survey of seven analysts and traders by Bloomberg Energy Service. A gain of that size would leave U.S. gas inventories at 1.291 trillion cubic feet, or 1% above the 1.274 trillion cubic feet reported during the same week last year.
“A couple of months ago, people were looking for the storage deficit to be erased by the end of the summer,” said Jim Ritterbusch, president of Ritterbusch & Associates, an energy consulting firm in Galena, Ill. “Now it looks like it’s going to be erased even before the summer begins.”
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Gas Bust
Natural gas futures prices plunged to a 10-month low Tuesday amid rising inventories in much of the country.
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Near-term natural gas futures, monthly closes and latest in New York, per million BTUs
Tuesday: $3.74, down 23.5 cents
Source: Bloomberg News
