Supply glut sends natural gas prices crashing on Nymex
With demand sliding, natural gas prices are down 39% this year
By Tom Stundza -- Purchasing, 4/24/2009 2:52:00 PM
The slowdown in the U.S. economy has cut demand for natural gas as a fuel to run factories and as a feedstock to make chemicals, plastics and steel. The glut increased to 1.741 trillion cubic feet in the week ended April 17, the Energy Department says, or about 438 billion cubic feet above the same time last year. And that oversupply has sent natural gas prices crashing more than 39% this year.
Natural gas for May delivery fell 12.315¢, or 3.6%, to settle yesterday (April 23) at $3.394 per million British thermal units on the New York Mercantile Exchange, the lowest closing price since Sept. 12, 2002.
A Bloomberg News report says the decline in industrial usage of natural gas is about 2 billion cubic feet a day lower through the first quarter compared with the same period a year earlier. That’s because the U.S. economy probably will contract 2.8% this year, the International Monetary Fund has forecast this week. So, “industrial natural gas consumption is expected to decline by more than 7%, as industrial production declines during the current economic downturn,” the Energy Department now projects. “Total natural gas consumption is projected to decline by 1.8% in 2009 and remain relatively unchanged in 2010.”
Natural gas supplies are showing no sign of diminishing at a time when consumption is weak because peak-usage winter heating period has ended and slack manufacturing shows no sign of improving. The end-use “trend has been lower and lower and there’s no reason to think that’s stopping right away,” Tom Orr, research director at the Weeden & Co. brokerage in Greenwich, Conn., tells Bloomberg. The Energy Department says current inventories are now 310 billion cubic feet above the five-year average (2004–2008).
See also: EIA: Natural gas use will slide this year
Natural gas falls below $4 on supply glut
08/07/2009Natural gas prices continue to decline
07/30/2009Natural gas supplies set new record
10/04/2009EIA: Natural gas use will slide this year
04/14/2009Natural gas prices will remain high
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