Oil and Natural Gas Prices Erode as Traders Eye Warmer Weather

Strategic Insights -

Traders sold off oil and natural gas futures for the third straight day, eroding significant price gains built up during extremely cold weather in January 1994. The New York Mercantile Exchange saw contracts for March delivery of natural gas futures fall by 2.2 cents to $2.347/MMBtu, while March No. 2 heating oil futures dropped 1.08 cents to 49.98 cents/gallon. March West Texas Intermediate crude oil futures tumbled 38 cents to $15.25/bbl, giving up 70% of the $1.10/bbl increase from the previous week.

Key Takeaways:

  • The recent price gains in oil and natural gas markets, fueled by extreme cold weather, are rapidly disappearing as traders anticipate warmer temperatures and decreased demand.
  • Long-term weather forecasts predict a return to near-normal winter temperatures in the key Northeast region by next week, potentially signaling a decline in winter heating fuels consumption.
  • Natural gas futures contracts for March delivery fell by 2.2 cents to $2.347/MMBtu, erasing nearly all of the 39-cent/MMBtu price increase over the past two weeks.
  • March No. 2 heating oil futures dropped 1.08 cents to 49.98 cents/gallon, representing a two-thirds decline from the 5.6-cent/gallon price increase over the past two weeks.
  • March West Texas Intermediate crude oil futures fell 38 cents to $15.25/bbl, giving up 70% of the $1.10/bbl increase from the previous week.
  • Unleaded regular gasoline futures for March delivery to New York Harbor fell 1.39 cents/gallon to 44.24 cents/gallon, and have now dropped back about 40% of the 4.85-cent/gallon price gain over the past two and a half weeks.

Statistics:

  • Natural gas futures contracts for March delivery fell by 2.2 cents to $2.347/MMBtu.
  • March No. 2 heating oil futures dropped 1.08 cents to 49.98 cents/gallon.
  • March West Texas Intermediate crude oil futures tumbled 38 cents to $15.25/bbl, representing a 70% decline from the previous week's increase.
  • Unleaded regular gasoline futures for March delivery to New York Harbor fell 1.39 cents/gallon to 44.24 cents/gallon, representing a 40% decline from the 4.85-cent/gallon price gain over the past two and a half weeks.
  • The Organization of Petroleum Exporting Countries' decision to stand pat on their oil production ceiling may be called into question by the recent price drop.

Sources:

  • The New York Mercantile Exchange
  • The Oil Daily
  • Computer Petroleum Corp.