Natural Gas Drops after Huge Storage Surplus Expected

Calm weather and plenty of storage makes natural gas fall 1.83% on Friday.

The price is down to $1.82 now, with industry veterans placing the blame primarily on mild weather conditions and little demand for natural gas. The price is up from Tuesday, however, where it had fallen to $1.73. A mostly bullish week is coming to a close on a bearish trend.

The gains made midweek are not lost, and the price could increase over the next week as major gas provider Chesapeake is planning to drastically cut its production. The company said it is seeing less demand than expected and having fewer orders filled, and the company is looking to cut back to save money during the upcoming summer crunch. It is during those hot months that gas sales slow as there is less need for it to heat homes.

Short-Term Forecast

Natural gas prices in the US will probably trend bearish in the short term. Regular production continues, moderate weather is helping to keep the price steady, and there is plenty of storage to offer. These factors work together to keep the price from going down, they should continue to do so moving forward until we approach the fall season when economies look for gas to prepare for winter.

Lower demand is expected through the hot season, and this should result in excess natural gas in storage. We warn traders to be careful about their investment in natural gas and to check both storage data and weather outlooks to determine where the market might be headed.

In Europe, natural gas prices may increase thanks to Russian sanctions. This means Russia and its trading partners will be doing business with each other and excluding England and other Western powers in Europe. As European countries continue to oppose the incursion into Ukraine and place sanctions on Russia, this can drive up natural gas prices and cut off buyers and suppliers from working with each other.