U.S. natural gas futures plunge on bearish winter weather outlook

U.S. natural gas futures plunged to the lowest since July as the weather forecast for the new year shifted milder and European gas prices slid from record-high levels.

U.S. natural gas futures plunged to the lowest since July as the weather forecast for the new year shifted milder and European gas prices slid from record-high levels.

Futures fell 6.2 per cent on the New York Mercantile Exchange Thursday, the most since early December. Unseasonably high temperatures are expected on the East Coast and southern U.S. through next week, dampening demand for the heating and power-plant fuel. Trading has meanwhile thinned heading into the U.S. holiday weekend, raising the likelihood of sudden swings.

“We expect the weather data will continue to bounce between colder and warmer trends for the first week of January in the coming days, making holding over the long Christmas Holiday break extremely risky,” analysts with NatGasWeather.com wrote in a note to clients. 

Thursday’s sell-off comes after gas prices in Europe plunged 20 per cent on expectations that a flotilla of liquefied natural gas cargoes en route from the U.S. will help to ease an energy crisis that has driven futures to record highs and shut factories. U.S. LNG export facilities have been operating at or above capacity in recent weeks and 30 tankers carrying nearly 5 million cubic meters of the fuel combined are crossing the Atlantic.

Anemic declines to U.S. gas inventories at the start of winter have underscored the impact of higher-than-normal temperatures. Utility companies and other customers drew just 55 billion cubic feet of natural gas from winter storage last week, in-line with analyst expectations but less than half the 5-year average demand for that time of year, a report released Thursday showed.