U.S. natural gas prices are off to the worst start to a year since 2006, and the rout may not be over yet.
Eight of 12 traders and analysts surveyed by Bloomberg see futures sliding further after dropping 29 percent so far this year. Three were bullish and one predicted prices would hold steady.
Record warmth from the Midwest to the East Coast has decimated gas demand for heating, leaving inventories above normal for the time of year and sending prices plummeting to an eight-month low. While an uptick in gas exports to Mexico and overseas buyers has boosted consumption, the supply glut will expand as spring approaches, pressuring the market lower.
The high at New York’s LaGuardia airport may reach 68 degrees Fahrenheit (20 Celsius) Feb. 25, which would tie the daily record set in 1976, according to Commodity Weather Group LLC. Gas futures for delivery in March, which represents the last month of the peak demand period, expire on Friday.
“Winter is over,” said Jason Schenker, president of Prestige Economics LLC in Austin, Texas. “That doesn’t stop the pain train the natural gas bears are driving. You could see the lowest prices of the year in this period.”
Gas futures have fallen 6.7 percent so far this week to $2.643 per million British thermal units at 12:25 p.m. Thursday on the New York Mercantile Exchange. On Wednesday, prices dipped to $2.522, the lowest since June 9.
Still, prices may partly recover after reaching a key technical level, said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. The relative strength index fell below 25 on Tuesday, the least since Dec. 2015. An RSI reading below 30 is a condition that some traders view as a signal to buy.
While gas isn’t likely to climb back above $3 anytime soon, “a move higher is in the realm of possibilities,” Yawger said.