U.S. natural gas prices fell below $3 per million British thermal units this week for the first time in two years amid continuing warm weather that started a commodity selloff.
Prices first dipped below $3 per MMBtu on Wednesday and were still there as of today, trading at a little over $2.9 per MMBtu at the time of writing.
According to Bloomberg, the price decline in natural gas was a result of, above all, the mild winter in the northern hemisphere. The fact that both the United States and Europe managed to fill up their gas storage ahead of the start of heating season also played a bearish role in natural gas prices.
U.S. gas production surged over the past two years, making ample supply available in response to higher demand. Production is set to continue to grow this year, as well, according to the Energy Information Administration.
Continued increases in U.S. dry natural gas production will outpace domestic demand and exports this year and next, sending the average U.S. gas benchmark price lower than in 2022, the EIA said earlier this month.
According to its January Short-Term Energy Outlook, the EIA expects the U.S. benchmark Henry Hub price to average $4.90 per million British thermal units this year. The projected average would be more than $1.50/mmBtu lower compared to the 2022 average of natural gas prices.
The gas industry, however, is giving a different signal. Two industry executives this month have suggested independently of each other that natural gas production growth may be about to slow down.
“Growth in gas supply is not needed in the short term. We do think the industry should acknowledge that and may reduce growth in the near term,” said Chesapeake Energy’s CEO, Nick Dell’Osso.
Separately, the CEO of EQT said that a forecast 3-billion-cu-ft increase in U.S. daily natural gas production might never materialize. “That’s a little ambitious with the current pullback and prices,” Toby Rice told Bloomberg in an interview. “You are going to see an operator response and slow down in the activity levels.”