U.S. Natural Gas Prices Decline as Mild Weather Eases Demand Pressure

U.S. natural gas futures hovered just above $3.0/MMBtu last week, approaching their lowest levels since early December. Despite a record-breaking storage withdrawal, expectations of milder temperatures in the coming weeks have kept demand in check, limiting price gains. Natural Gas ETFs lost 7.92% last week, bringing their year-to-date performance to -1.76%.

Weather and Demand Expectations

Meteorologists forecast above-normal temperatures across most of the lower 48 states through February 7, followed by a return to seasonal norms from February 8-14. The anticipated mild weather is expected to curb heating demand, applying downward pressure on natural gas prices.

Historic Storage Withdrawal

The latest report from the U.S. Energy Information Administration (EIA) revealed a significant storage withdrawal of 321 billion cubic feet (bcf) for the week ending January 24. This surpasses both the 234 bcf draw recorded a year ago and the five-year average decline of 189 bcf. Although this is only the fourth time a weekly withdrawal has exceeded 300 bcf, it remains below the all-time record of 359 bcf set in January 2018.

This sharp decline erased the small surplus of natural gas over the five-year average, marking the first time since January 2022 that storage levels have fallen below historical trends. However, despite this historically large withdrawal, natural gas prices paradoxically declined, reflecting the market’s focus on milder weather forecasts and expectations of weaker demand in the coming weeks.

ETF Performance in Natural Gas

The decline in natural gas prices has also impacted natural gas ETFs. The WisdomTree Natural Gas ETF (NGAS) recorded a weekly decline of -10.56%, reflecting the bearish sentiment in the market. Year-to-date, this ETF remains slightly down at -1.54%. Similarly, the BNP Paribas Henry Hub Natural Gas ETC (BNQ9) posted a weekly drop of -11.02%, bringing its year-to-date performance to -2.15%.

Here’s a comparison between Natural Gas ETFs

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Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.