US Midwest natural gas prices have tumbled from year-earlier levels and may remain mired at those lower levels after a mild winter left regional gas inventories at an eight-year high.
Daily prices at Oneok, Oklahoma, and at Chicago Citygates in March both plunged by 39pc from March 2023, averaging of $1.25/mmBtu and $1.42/mmBtu, respectively.
Prices at the Northern Natural Gas demarcation point in Kansas tumbled year over year by 70pc, while March prices at Mich Con Citygates were down by 60pc.
Those sharp price drops underscore rising gas output from key producing states such as Oklahoma and North Dakota and a mild winter that has swelled natural gas inventories, lowering the chances that gas prices will rise significantly this spring.
March is the final month of the US gas market's five-month-long winter heating season. The market in April begins a period known as the spring shoulder season, when weather-related gas demand usually goes slack, allowing injections into gas storage to resume.
Regional inventories are headed into that low-demand period flush with supply. US Midwest inventories as of 29 March were 510 Bcf (14.4bn m³), up by 38pc from the five-year average and the highest level for the last week of March since 2016, according to the US Energy Information Administration (EIA). Stocks were 20pc higher than a year earlier.
Stockpiles have remained well above average levels for most of the winter on warmer-than-normal weather. Heating demand from November to February in the east north-central and west north-central US was 16pc lower than the seasonal norm, according to the National Weather Service.
Inventories were also buoyed by increases in gas production. US dry natural gas output in 2023 rose by 4pc to 103.8 Bcf/d (2.9bn m³), up from 99.6 Bcf/day in 2022, according to the Energy Information Administration (EIA).
Gas production in some midcontinent states hit records this winter. North Dakota's December gas output rose to 3.5 Bcf/d (99mn m³/d), 33pc higher than the same period in 2022, according to preliminary data from the North Dakota Pipeline Authority. December's output beat the historical record set two months earlier in October. Gas output from Oklahoma this winter neared the record set in 2019.
The downturn in gas prices and a dim outlook for demand this year has spurred large gas producers such as Chesapeake Energy and EQT to pare output. Producers have also cut rigs and delayed well completions until prices move higher. That reduction in activity, though, may take time to cut into US supplies.
The EIA said it expects production to modestly contract in 2024 as producers respond to low prices. A decline in US output this year would be the first since 2020, potentially giving prices a bump up. Producers were also expecting a recovery in 2025 as new LNG export capacity starts up along the US Gulf coast.
