After holding above $2/MMBtu in the first half of January, the CME/NYMEX February natural gas futures contract caved in this week, closing Tuesday and Wednesday at $1.895/MMBtu and $1.905/MMBtu, respectively. The last time we saw prices this low was in March 2016. But to see such levels trading in January, typically one of the coldest and highest-demand months of the year, you’d have to go back more than two decades — to 1999. Today, we explain the fundamentals behind the price collapse earlier this week and its implications for the 2020 gas market.
The U.S. natural gas market has been in a precarious state for some months now. We discussed some of the fundamental challenges facing the market in a couple of late-injection-season blogs — I’m Tore Down and Un-Thinkable. At the time, Lower-48 dry gas production volumes had been ascending for several months straight (since July 2019) and peaked in late-November above 96 Bcf/d. Lower-48 consumption — from power generation, industrial and residential/commercial (res/comm) customers — was high and setting records of its own. But the consumption gains were modest compared with the supply increases, and were undercut by summer weather that was milder than the previous year. Also, some of the LNG export demand from new liquefaction trains that had been expected much earlier in the year came too late in the injection season to affect the inventory build-up. All that led to the market by October wiping out any remaining storage deficit versus the previous year and the five-year average, and further, amassing a large surplus in storage compared with a year earlier. Prompt-month prices, which already were trading lower than 2018, peeled even lower and by October/November were skimming near multi-decade lows for that time of year — and not just for a day here and there, but on a monthly and seasonal average basis.
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Despite these bearish factors, the bulls in the market held on. The coldest, highest gas-demand months of the year were still ahead, after all — there was still the possibility that an exceptionally cold winter could reverse their fortunes. Plus, as absolute temperatures dropped heading into winter and seasonal wellhead freeze-offs took effect, production receded from the peak seen in late November, providing some support to prices.
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About the song
"1999" was written and produced by Prince, and appears as the first song on side one of Prince's fifth studio album of the same name. Our blog title refers to one of the song’s most memorable lines: “Oops, out of time, so tonight I’m gonna party like it’s 1999.” The song was released as a single in September 1982, and went to #1 on the Billboard Dance Club Songs, #4 on the Hot R&B/Hip-Hop Songs and #12 on the Hot 100 charts.
The double album 1999 was recorded between January and August 1982 at Kiowa Trail Studio in Chanhassen, MN, and at Sunset Sound Recorders in Hollywood. Prince wrote all the songs on the album and produced it. This is the first album to feature Prince's "Revolution" band. The album yielded three Top 20 singles. Released in October 1982, 1999 went to #4 on the Billboard Top R&B/Hip-Hop Albums and #9 on the Billboard Top 200 Albums charts. It has been certified 4x Platinum by the Recording Industry Association of America. Personnel on the record were: Prince (lead vocals, all other instruments), Dez Dickerson (co-lead vocals, backing vocals, guitar solos), Lisa Coleman (co-lead vocals, backing vocals), Jill Jones (co-lead vocals, backing vocals), Vanity (backing vocals) and Wendy Nelson (backing vocals). Revolution band members Doctor Fink (keyboards), Bobby Z (drums) and Brown Mark (bass) did not play on the album, but appeared in the music videos from it.
Prince (Prince Rogers Nelson) was an American singer, songwriter, musician, record producer, dancer, actor and filmmaker. Born and raised in Minneapolis, Prince got his first record deal at the age of 19. He has sold over 130 million records worldwide. He released 39 studio albums, four live albums, nine compilation albums, 13 EPs and 106 singles. He has won one Academy Award, seven American Music Awards, one Billboard Music Award, seven Brit Awards, one Golden Globe Award, 10 Grammy Awards and four MTV Video Music Awards. He is a member of the Rock and Roll Hall of Fame, UK Music Hall of Fame and Rhythm and Blues Music Hall of Fame, and holds an honorary Doctor of Humane Letters from the University of Minnesota. Prince died in April 2016. He was 57 years old.
