Global Natural Gas Prices Plummet Amidst COP28 Prospects and Widespread Oversupply Challenges

Amsterdam (The Netherlands): Natural gas prices are rapidly decreasing on Monday due to reports suggesting that the COP28 agreement is imminent. Two primary factors impacting natural gas prices lately include the winter weather in the United States and the increasing trade of liquefied natural gas (LNG) with Europe and Asia. The decrease is a result of various factors that all indicate the same problem: there's no demand. The beginning of the conflict between Russia and Ukraine last year caused a shock to US natural gas prices because Europe faced a significant cut in supply from Russia, its primary natural gas supplier.

European storage facilities remain substantially filled, ensuring a smooth transition through the winter months without any disruptions. Adequate inventories and low demand during this winter have made investment managers feel negative about European natural gas for the first time since September. As a result, prices have fallen to their lowest in four months. Earlier this week, prices dropped on Monday because of the mild weather and increased wind power production, which decreased the need for natural gas in both heating and generating electricity.

Last week, U.S. natural gas futures dropped by 3.15% but showed strength by bouncing back from a low point lasting several months. On Friday, they surged by around 4%, reaching the highest point in a week. This rebound happened because people expected higher demand in the following week, more than what was predicted before. Despite there being a lot of gas produced and the weather is expected to stay mild, which means less need for heating, the market's ability to recover shows how unpredictable it can be. It also shows that many people are optimistic and think demand will increase, which is why the market is showing positive signs.

Problems with starting new LNG export places could slow down how much natural gas the U.S. needs and the expected prices for 2024. But because many places around the world want more natural gas, the prices in the U.S. might go up in the future. This might happen especially when these new export places start working.

Chinese demand is turning into oversupply, and traders are now seeking other regions to offload the surplus. As China had rainy, snowy, and cooler weather, causing problems with transportation and limiting the supply and movement of goods in the market. Right now, there's a lot of stuff stored up for sale, but not many people are buying it. Companies that make liquid things want to sell off what they have stored, so they're ready to lower prices. This is why liquid natural gas prices keep going down.

The natural gas market seems positive for the next week because people expect more demand. Even though there's a lot of gas available and the weather might not need much heating, what happens with demand and how much gas gets exported will be important in deciding prices.