US natural gas futures plunged 7% to their lowest since 1995 on Wednesday, alongside a 24% collapse in oil prices, as travel bans sparked by the coronavirus slashed the global outlook for energy demand.
"The natural gas market's capitulation has reached a new stage with today's final spiral ... to its lowest mark in decades," Daniel Myers, market analyst at Gelber & Associates in Houston, said in a report. "Today's settlement will be an important sign to determine if the market has found rock bottom or if it will search for an even lower foundation."
In addition to the oil price meltdown, analysts said expectations for a very small storage withdrawal last week and forecasts for milder weather and lower heating demand over the next two weeks also contributed to the gas price drop.
Front-month gas futures for April delivery on the New York Mercantile Exchange fell 12.5 cents, or 7.2%, to settle at $1.604 per million British thermal units (mmBtu), its lowest since September 1995. The all-time low for gas futures was $1.04 in January 1992.
Oil prices plunged, with US crude futures hitting an 18-year low, as governments worldwide accelerated lockdowns to counter the coronavirus pandemic that is causing global fuel demand to collapse.
Analysts noted most gas speculators were better prepared for the current price collapse than oil speculators since their bets on gas futures and options have been net short since May 2019 - reaching a record speculative net short position of 309,492 contracts in mid February.
Oil speculators, meanwhile, were net long and have always been net long, according to Refinitiv data going back to 2009.
Even before the coronavirus started to spread around the world, gas prices were already trading near their lowest in years as near-record production and months of mild weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely this winter.
Gas futures were down about 45% below the eight-month high of $2.905 per mmBtu hit in early November.
Refinitiv projected gas demand in the US Lower 48 states, including exports, would rise from an average of 104.4 billion cubic feet per day (bcfd) this week to 105.3 bcfd next week. That is lower than Refinitiv's forecasts on Tuesday of 104.7 bcfd for this week and 106.8 bcfd for next week due to milder weather forecasts than earlier expected.
The amount of gas flowing to US liquefied natural gas (LNG) export plants was on track to rise to 8.3 bcfd on Wednesday from 8.0 bcfd on Tuesday, according to Refinitiv. That compares with an average of 8.0 bcfd last week and an all-time daily high of 9.5 bcfd on January 31.
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