Natural gas prices down over 70% in 1 year. Decoding the bad news
natural gas prices shed more than 70 per cent in the last 12 months, influenced by a complex interplay of supply and demand dynamics shaped by geopolitical events, weather patterns, technological advancements, and global economic conditions. In the key US NYMEX futures platform, prices have been struck at $2-3 mmbtu levels since the start of the year. Similarly, after hitting an all-time high of Rs 801 in domestic MCX futures, prices plummeted sharply, trading below Rs 250 levels throughout the period.
The year 2022 was the most volatile period ever for gas prices. Global supply chain uncertainties due to the Russia-Ukraine war and export hindrances from the top producer, the US, resulted in unusual price fluctuations in the commodity. Russia used its natural gas exports as an economic weapon against Western European countries last year, which forged worries over acute fuel shortage, sending prices to record highs.
This has disturbed global trade flows that hampered consumers, businesses, and economies worldwide. Meanwhile, situations have been entirely different in the past many months. Europe has replaced Russian gas, and the winter was unseasonably warm, which prevented shortages.
Rising inventory levels in the US amid worries over a weak global growth outlook also affected the sentiment of the fuel. LNG is a widely used energy in the industry sector, and hence, its price and industry demand are closely related. The recent economic jitters in China, the third largest consumer of this fuel, and global growth worries due to high-interest rates weighed down industrial activities and thus, the demand for energy commodities.
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