U.S. natural gas falls below $3 for the first time since May 2021

(Bloomberg) — U.S. natural gas futures continued to fall below $3 as mild winter weather triggered the biggest sell-off in commodities in the country.

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Gas for February delivery traded at $2.919 per million British thermal units early Thursday on the New York Mercantile Exchange. Prices are at their lowest level since May 2021 after dropping below $3 on Wednesday.

Doomsday fears that suppliers would be unable to keep up with winter demand were erased by a confluence of factors that sent gas prices plummeting after hitting a 14-year high of $10.03 in August.

The main reasons for the fall:

  • The US and Europe managed to replenish their buffer stocks ahead of winter, and the relatively pleasant seasonal temperatures in the Northern Hemisphere have so far reduced demand for heating.

  • And the longer-than-expected closure of a major Texas liquefaction terminal has limited US gas exports and thus boosted domestic supplies.

  • US natural gas production has rebounded over the past two years to a record high, flooding the market with fuel.

Natural gas has been one of the most optimistic commodities in recent years. Prices hit an August high amid a global supply crisis exacerbated by Russia’s invasion of Ukraine last year.

But according to data released by the US Commodity Futures Trading Commission on Friday, hedge funds have become the most bearish on US gas prices in nearly three years.

–With the assistance of Ann Koch and Stephen Stapczynski.

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