Its been more than five weeks since the buyers of Natural Gas are witnessing a continuous decline in the commodity's price. Heating fuel futures which are listed on the NY's Mercantile Exchange, are already down by 5% for the week. In addition, the same financial asset has lost 48% of its value during the last 4 weeks.
According to experts, high temperature despite the winter season is the reason for less consumption of natural gas. In simple words, people are consuming less natural gas to heat up the buildings, which is leading to a decreased demand.
Experts believe that the current situation of the natural gas market is one of the worst in a long time. And at the heart of the problem is a winter that is warm! Yes, temperatures so high were last seen almost 20 years ago during the winter season.
The gas contract for February was settled at around $3.174 on Friday. And now, the same contract has reached the price of $3.11 which is a 19-month low.
Looking ahead, there is fear among the natural gas bulls that the contract will reach the $2 price level. But, it seems that the $3 support is holding for the bulls!
As for the analysts, they are still a light of hope for the natural gas bulls provided that nature cooperates. And that cooperation also has to come quickly.
We still have several winter months such as January, February, and March before the season officially ends. Furthermore, the biggest factor that can affect natural gas prices is the weather. If the weather gets colder, people will be forced to consume more gas.
But there is also a positive side to all of this - People had to spend less money on heating their homes which is a good thing provided the decades high inflation.