Gas price deflates to 14-year low

US natural gas prices have slipped below $2 per million British thermal units for the first time since 2001. Prices have slid by 35% in 2015. The warmest start to a winter on record in America has subdued demand and raised concerns that the glut on the market could now last even longer. Production has remained healthy and stockpiles are close to all-time highs.

What the commentators said

Unseasonably warm weather has New Yorkers sweating in Central Park, said Lex in the FT. “That is nothing compared to the heat on US gas producers”. For some time now, investors have believed that the slump in the market can hardly get any worse. This belief “has led to massive losses for the holders of gas producers’ debt and equity”.
It hardly helps, as Timothy Puko pointed out in The Wall Street Journal, that gas companies, “emboldened by new-found supplies of US shale gas, have ramped up output in a race to squeeze out rivals”. Now production is at a record high,
even though prices have been sliding for two years.

So what prospect of a rebound in prices? The warm weather, a result of the
El Niño phenomenon, looks set to last until at least the end of the month. Given the oversupplied market, “without a turnaround in the weather, there’s not much to halt this kind of price slide”. Longer term, though, the outlook is cheerier. Demand is set to climb globally because gas is the cleanest-burning fossil fuel and “increasingly stringent environmental regulation” will dent demand for coal, said Eoin Treacy on There is still no way of storing wind and solar energy efficiently. Overall growth in electricity usage and gas required for petrochemicals should also bolster demand, as Lex pointed out. A market bottom may not be too far away.

Leave a Reply

Your email address will not be published. Required fields are marked *