- Natural gas prices plunged as much as 10% on Tuesday to levels not seen since September 2020.
- US prices fell to a low of $2.06 per million BTUs, representing a 79% decline from its August high.
- The decline in natural gas prices can be attributed to a mild winter that has led to less demand.
Natural gas prices continued their precipitous decline on Tuesday as the energy commodity plunged to levels not seen since September 2020.
US natural gas prices fell as much as 10% to a low of $2.06 per million BTUs on Tuesday, representing a decline of 79% from its August high.
Russia’s invasion of Ukraine nearly one year ago had sparked a surge in natural gas prices and other commodities as it became apparent that Europe would have to eventually stop buying from Russia and find other sources amid an onslaught of economic sanctions.
To prepare, Europe built up its reserves of the fuel to prepare for a potentially dire winter scenario in which cold weather would spark strong demand and lead to dwindling supplies and a price surge.
But an unusually mild winter has helped Europe avoid those fears, as demand for the commodity did not prove to be as strong as it would be during a particularly cold and prolonged winter.
This has led to a surplus of the commodity that is taking up more and more storage space after Europe hoarded supplies.
The combination of weak demand and rising supply for natural gas is a dynamic that Chesapeake CEO Nick Dell’Osso warned about last month, when natural gas prices were trading just over $3.00. Dell’Ossoa said that natural gas producers should reduce production to avoid a downward spiral in prices.
“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,” Dell’Osso said in an interview last month.