March 18, 2020 / 4:37 PM / 15 days ago

U.S. natgas drops to lowest since 1995 as coronavirus cuts global demand outlook

(Reuters) - U.S. natural gas futures plunged 7% to their lowest since 1995 alongside a 15% collapse in oil prices as travel bans sparked by the coronavirus slashed the global outlook for energy demand.

Front-month gas futures for April delivery on the New York Mercantile Exchange fell 12.1 cents, or 7%, to $1.608 per million British thermal units (mmBtu) at 12:08 p.m. EDT (1608 GMT).

If the contract closes at its current level it would be its lowest settle since September 1995.

Oil prices, meanwhile, fell for a third session, with U.S. crude futures tumbling to an 18-year low.

Analysts noted most gas speculators were better prepared for the current price collapse than oil speculators since their bets on gas futures and options have been net short since May 2019 - reaching a record speculative net short position of 309,492 contracts in mid February.

Oil speculators, meanwhile, were net long and have always been net long, at least according to Refinitiv data going back to 2009.

Even before the coronavirus started to spread around the world, gas prices were already trading near their lowest in years as near-record production and months of mild weather enabled utilities to leave more gas in storage, making fuel shortages and price spikes unlikely this winter.

Gas futures were down about 45% below the eight-month high of $2.905 per mmBtu they hit in early November.

Looking ahead, gas futures for calendar 2021, however, were trading above 2022 for a fourth session in a row for the first time since May 2019 on expectations low energy prices will boost gas demand later this year.

In addition, the premium of November 2020 futures over October, a bet on the weather next winter, rose to its highest since October 2010.

Refinitiv projected gas demand in the U.S. Lower 48 states, including exports, would rise from an average of 104.4 billion cubic feet per day (bcfd) this week to 105.3 bcfd next week. That is lower than Refinitiv’s forecasts on Tuesday of 104.7 bcfd for this week and 106.8 bcfd for next week due to milder weather forecasts than earlier expected.

The amount of gas flowing to U.S. liquefied natural gas (LNG) export plants was on track to rise to 8.3 bcfd on Wednesday from 8.0 bcfd on Tuesday, according to Refinitiv. That compares with an average of 8.0 bcfd last week and an all-time daily high of 9.5 bcfd on Jan. 31.

Gas production in the Lower 48 states slipped to 93.9 bcfd on Tuesday from 94.5 bcfd on Monday, according to Refinitiv. That compares with an average of 93.9 bcfd last week and an all-time daily high of 96.6 bcfd on Nov. 30.

Reporting by Scott DiSavino and Jessica Resnick-Ault; editing by Diane Craft

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