Natural Gas Market Goes Cold

Weather forecasts call for warmer-than-average temperatures in the next two weeks   

Nicole Friedman

The Wall Street Journal


Updated Oct. 26, 2015 3:55 p.m. ET

NEW YORK—The benchmark U.S. natural-gas price tumbled to its biggest one-day decline since February 2014 on expectations of a deepening supply glut.

Forecasts for warm fall weather across swaths of the U.S. spurred the nearly 10% plunge on Monday. Above-average temperatures at the start of heating season will undercut seasonal demand, analysts say, boosting stockpiles that already are near record highs.

“The market is now in absolute free fall,” said Stephen Schork, editor of energy-trading newsletter The Schork Report. “There’s no real strong forecast for any weather-[related] demand in the near future.”

The North American natural-gas market has been mired in a supply glut for years amid robust output. Companies continue to grow more efficient at extracting the fuel from shale rocks in Pennsylvania, Texas and elsewhere, and they’re able to maintain production even as gas prices plumb three-year lows.

But Monday’s selloff nevertheless is another blow to energy producers, which now must grapple with falling natural-gas prices in addition to low oil prices. Producers have struggled with persistently low gas prices for years and are now seeing additional threats to their earnings due to the past year’s plunge in oil prices.

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