Market Insider

Natural gas tumbles on warmer February forecast, after brutal cold snap

Key Points
  • Natural gas futures for February plummet more than 7 percent on forecasts for warmer February weather, after this week's brutal cold snap.
  • Weekend weather forecasts showed a change in the outlook, with warmer and above normal temperatures in the first part of February.
A floor crew pull steel pipe out of a natural gas well in the Barnett Shale of Fort Worth, Texas that is owned by Chesapeake Energy Corporation.
Robert Nickelsberg | Getty Images

Natural gas prices fell sharply Monday, as weather forecasts for February show more normal and even warmer-than-normal temperatures for parts of the U.S., following a brutal cold snap this week.

Natural gas futures for February fell 7.2 percent to $2.95 per million British thermal units.

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Nat gas prices plunge on warmer February forecast

"The forecast tuned a little milder for next week, and they took the bottom out of the market again. The storage picture has been altered a bit, and there really are no worries. If February doesn't turn out to be the coldest month of winter, justifying a plus $3 price is hard for the market," said Gene McGillian, manager market research at Tradition Energy.

6-10 Day Forecast

Source: NOAA

The market has been volatile this winter with worries about low amounts of gas in storage, but high levels of production have helped alleviate that concern.

"Last week was the first week compared to a year ago that we flipped to a small surplus for the first time in about 18 months," McGillian said. Inventories still remain below the five-year average.

8-14 Day Forecast

Source: NOAA

Forecasters had been expecting a longer period of cold temperatures.

"Weekend weather model guidance moved in about as bearish a direction as possible, with incredible warming in the medium-range as cold in the short-term quickly gets kicked out and replaced by ridging across the East," Bespoke Weather noted.

Bespoke said risks of cold temperatures return in the medium to longer range, and moderate cold could return in the middle of the month.