The NYMEX November natural gas futures contract closed at a one-year low Monday after dropping 6.2 cents to settle at $3.561/MMBtu, without any weather-related demand in sight to prop up prices.
The contract traded in a range between $3.547/MMBtu and $3.644/MMBtu Monday. The last time the front-month gas contract settled lower was October 28, 2013, at $3.61/MMBtu.
Analysts agreed that $3.50/MMBtu is the nearest support level, as prices below that mark will encourage coal-to-gas switching in the power generation sector.
"The market continues to grind lower," said Tradition Energy senior analyst Gene McGillian. "We don't have enough seasonal demand to make up for all the gas coming out of the ground."
"Ultimately, you need something weather-related to move the market," enerjay principal Jay Levine said. "It's three things: How soon? How cold? And how widespread?"
The eastern part of the US will continue to experience warmer-than-normal conditions over the next five days and have 10 less heating-degree-days in the longer-range 11-15 day forecast, according to WeatherBell Analytics' latest forecast.
With roughly 2 Bcf/d of new pipeline capacity out of the Marcellus Shale scheduled to enter service in the next few months, "the likelihood that the fundamental balance in the industry will slip back into a surplus in 2015 has set a rather bearish tone to the heating season ahead," BNP Paribas analyst Teri Viswanath said.
"It is interesting to note, however, that the market made a similar early bearish call on the winter of 2010/2011 only to see the front of the curve gain 20% from the October lows to the peak prices recorded in January," Viswanath observed.
"Without further verification of the winter weather ahead, it might be a bit premature to write-off the season at this juncture," she said.
The NYMEX settlement is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).
