Natural gas prices will be lower this winter than they were last year because the weather has been milder than expected and there are more sources.
A “sell the rallies” trade is still going strong, according to a recent note from Dennis Kissler, senior vice president at BOK Financial. This is because of the warmer temperatures in both the US and Europe.
“Since production has reached new highs and there is no winter demand, the path of least resistance stays lower,” Kissler said.
Tuesday, the price of natural gas futures (NG=F) was just above $2.30 per million British thermal units (MMBtu). In the past month, contract prices have dropped 25%. So far this year, they are down about 40%.
The sharp drop from last year’s highs of $10 per MMBtu in the US and record highs in Europe after Russia attacked Ukraine is very different from the current trend.
According to Irina Tsukerman, president of market research and geopolitical risk advisory at Scarab Rising, the situation in Ukraine has had an effect on the energy industry as a whole, even though it is unstable there.
More natural gas is coming onto the market because of more crude oil being produced in the US Permian Basin.
Prof. Birol Dindoruk of petroleum, chemistry, and biomolecular engineering at the University of Houston told Yahoo Finance, “When you make oil, you also make a lot of gas.” “The extra gas needs to be sold in some way.”
The Energy Information Administration thinks that this year the US will produce the most natural gas ever. Around 6.7% more natural gas was stored than the same time last year, in the last week of November compared to the same time last year.
Tsukerman said, “The US is becoming more of a major player and some of the excesses of the demand have worn off“
And Tsukerman thinks that demand will rise because the growth of the green energy sector “has hit quite a snag in a lot of places” and the warmer weather we’re seeing now might not last.
Kissler of BOK Financial said that a cold snap and oversold conditions could lead to a price spike, which he called an “exaggerated short covering type rally.”