NEW YORK—Natural gas futures plunged around 6% after a U.S. agency said gas production rose to a new record, renewing concerns about excess supply at a time of weak weather-driven demand.
Just after 9 a.m. EST, natural gas futures for March delivery were down 15.6 cents, or 5.8%, at $2.557 a million British thermal units on the New York Mercantile Exchange. Tuesday's fall came on top of Monday's 1.6% drop, wiping away last week's gains from news that major producers were cutting back on production activity.
The Energy Information Administration on Monday reported gas output from the lower 48 U.S. states rose 1.3% in November to a record 72.61 billion cubic feet, at a time when unusually warm weather during what is supposed to be peak heating season has depressed demand. In a research note, Barclays Capital called the new figures "stunning."
Natural gas is a key component in home heating, and demand rises as temperatures drop. But this heating season, mild weather combined with robust production from U.S. shale fields has undercut the market's economics.
Weather outlooks were mixed, posing a conundrum for estimated demand in the coming days. The National Weather Service said above-normal temperatures will prevail over much of the west and northwest during the next six to 10 days, though the northeast will see normal temperatures and the southeast will face a cold-snap. Further out, MDA EarthSat said "the forecast has taken a major warm shift," and that predictions for below-normal temperatures in the northeast as far out as Valentine's Day were weakening.
"The report reawakened fears of a supply glut from record storage and production levels, which outweighed the potential for further announcements of producer cuts," Tradition Energy's
Addison Armstrong said in a note.
Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $2.51/MMBtu, according to IntercontinentalExchange, down from Monday's average of $2.7118. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $2.92/MMBtu, down from Monday's average of $3.1285.
