U.S. natural gas futures fell below $3 for the first time since May 2021, trading as low as $2.992/MMBtu Wednesday before the front-month February contract (NG1:COM) settled at a new 52-week low, -5.8% to $3.067/MMBtu.
Since fears that suppliers couldn’t meet wintertime demand pushed U.S. natgas prices to a 14-year high of ~$10/MMBtu in August, U.S. and Europe have refilled their buffer inventories ahead of winter, and relatively warm temperatures in the Northern Hemisphere so far have held down demand for heating.
A longer than expected shutdown at the Freeport LNG terminal due to a fire in June has constrained gas exports and thus raised U.S. supplies, contributing to lower prices; the facility moved closer to restarting operations as the U.S. Coast Guard determined a hazard study addresses its requirements.
ETFs: (NYSEARCA:UNG), (UGAZF), (BOIL), (KOLD), (UNL), (FCG)
Gas-focused equities have fallen sharply during the past month: EQT (EQT) -8.6%, Range Resources (RRC) -5.1%, Antero Resources (AR) -14.2%, Southwestern Energy (SWN) -9.7%, Chesapeake Energy (CHK) -7.6%.
While natural gas prices may bottom soon, the U.S. Natural Gas ETF (UNG) is “likely a poor bet today due to the immense ‘contango decay’ embedded in the futures curve,” Harrison Schwartz writes in an analysis posted recently on Seeking Alpha.