US natural gas futures fell 10% on Tuesday, in a technical correction aided by a shift to a slightly warmer weather outlook after expectations of a cold snap sent prices soaring to an over 13-year peak in the last session.
Front-month gas futures slipped 10% to $7.033 per million British thermal units as of 10:57 a.m. EDT, having scaled a peak since September 2008 on Monday.
“It’s mostly an issue of momentum and a correction to the huge run-up in prices over the past week… Prices that high are not supported by the market fundamentals,” said John Abeln, an analyst with data provider Refinitiv.
There has been a shift in the weather over the past 12 hours, with the 2-week forecasts shifting somewhat warmer, Abeln added.
Data provider Refinitiv estimated 130 heating degree days (HDDs) over the next two weeks in the Lower 48 US states, slipping from yesterday’s outlook of 156 HDDs, though slightly higher than the 30-year norm of 126 HDDs for this time of year.
HDDs, used to estimate demand to heat homes and businesses, measure the number of degrees a day’s average temperature is below 65 Fahrenheit (18 Celsius).
Meanwhile, data from Refinitiv showed average gas output in the US Lower 48 states rose to 94.5 billion cubic feet per day (bcfd) so far in April from 93.7 bcfd in March, down from December’s monthly record of 96.3 bcfd.
“Production levels are definitely the key focus in the near to medium term… While a production rebound is assured, the speed of that rebound is very much unknown, and the markets will really be watching that in the months to come,” Abeln said.
The International Monetary Fund on Tuesday slashed its forecast for global economic growth by nearly a full percentage point, citing Russia’s invasion of Ukraine, and warning that inflation was now a “clear and present danger” for many countries, triggering concerns over demand and also weighing on crude prices.