Today’s natural gas prices are lower than they’ve been in nearly twenty years. In fact, analysts say natural gas prices could soon plunge below $1. But what’s behind these falling prices? Here are two significant factors. (Plus, see why the natural gas industry isn’t sweating this so-called “market turmoil”.)
1. Soaring domestic supply
Natural gas production is at a historic high, and a combination of high production levels, weak demand and record levels of storage has been the biggest crusher on natural gas prices.
According to the U.S. Energy Information Administration (EIA), last year the U.S. produced 74.2 billion cubic feet of dry natural gas per day—an increase of 5.2% since 2014. The agency expects dry gas production to grow to 74.7 billion in 2016.
2. Warm weather
The El Nino contributed to an abnormally mild winter season in the U.S. And not only did low demand due to a warm winter cut into what is usually the strongest time of year in terms of demand, but it made the natural gas storage problem even worse.
Statistically speaking, thanks to unseasonably warm weather, residential demand for natural gas averaged only 19 billion cubic feet per day over the past few months, a 31-year low. At the same time, production neared an all-time high, increasing 5.3% from December 2014 to December 2015.
What’s The Good News?
Natural gas is about to enter a new generation, thanks to new forms of consumption. Check out this must-read blog for three game-changers that will transform the natural gas market. Read here!