US Natural Gas Price Plummets to 11-Week Low Amid Bearish and Bullish Factors

The US natural gas front-month futures contract on NYMEX (Henry Hub Natural Gas; CME Globex code: NG) has been trading at a low of $2.767 per MMBtu, down 16% in value this month and almost 20% since June 1.

This price is below the prior-year average of $3.621 and the five-year average price of $3.818, indicating potential undervaluation.

However, bearish factors such as record dry gas production, ample storage, bearish positioning, and reduced export flows may be contributing to the current low prices.

Bullish factors, including strong summer demand, geopolitical risk premium, and structural demand growth, suggest that natural gas may be undervalued.

According to a market analyst, 'I believe that U.S. natural gas is undervalued for two main reasons: 1) The recent decline was driven by production increase, but it is nothing unusual, and historically net supply tends to peak twice a year; 2) While storage level remains above the five-year average, I expect the surplus to shrink.'