Natural Gas Prices May Be Set For Downward Trend (ehh Natgas is already in a downtrend)
Jaica Mulera in Analysis , Commodities , News | Mar 4, 2016
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Natural gas prices have been the cheapest energy source for almost two decades. The price could even go down further due to increased supply. Just like how prices of crude oil declined due to excess supply, the same thing may be happening to natural gas prices. Natural gas futures declined on Thursday due to reduced demand of the commodity.
Declining natural gas prices are posing a challenge to countries with gas companies. It is believed that the fall of gas prices has something to do with the meltdown in global oil markets. According to Martin King, an expert at FirstEnergy Capital, natural gas prices are being pressured to lows never seen in the past 16 years.
Well, warm winters are at the center of controversy. It is known that natural gas companies aren’t fans of warm winters. El Niño is being blamed for the relatively warm conditions. Winter period is the most favorite time for the gas producers. Prices of natural gas can go up to $9 per gigajoule. This year, warm winter translated to low demand since not much air conditioning was being done. Less room heating was going on.
Natural Gas Prices
Natural Gas Drilling Rig. Pixabay Images
Situation At Natural Gas Producing Companies
Canada’s energy sector is feeling the impact of falling gas prices. Canadian gas prices have gone below $1.32 per million cubic feet. Energy analysts are convinced that the probability of the prices going down further is higher. With the onset of summer, less gas may be drilled taking into consideration underutilized stored gas for winter. Due to less heating during the winter period, most of underground gas storage facilities are still full.
The situation is similar in North America. Oil producers are set to neglect some of gas rigs until the situation gets better. It is expected that natural gas prices will be depressed until the next winter season. Production could be falling with about nine billion cubic feet per day this year. According to Brian Milne, analyst at National Bank, current prices are unsustainable and the possibility for supply-demand and pricing re-set can be achieved after a year.
The Bottom-line For Natural Gas Prices
Having a close look at the trend that gas prices are taking; possibility of continued price fall is high. The fact that gas producers complain of low demand of gas during winter makes one wonder what next for natural gas futures. The combination of high production and low demand is not doing any good to natural gas prices. Just like oil, to bring the prices higher, there is need to bring the supply down.
