Natural gas prices in the United States fell 4% on Tuesday, as traders bet that demand for the fuel will be lower than expected in the coming weeks.
The front-month contract for natural gas on the New York Mercantile Exchange (NYMEX) settled at $4.65 per million British thermal units (MMBtu), down 19 cents, or 4%.
The decline in natural gas prices comes as the weather in the United States has been mild, which has reduced demand for the fuel for heating homes and businesses. In addition, the amount of natural gas flowing to the United States from Canada has increased in recent weeks, which has also helped to weigh on prices.
Analysts say that natural gas prices are likely to remain under pressure in the near term, as demand remains weak and supplies are ample. However, they say that prices could rebound later this year, as demand for natural gas typically picks up in the winter months.
"The market is still oversupplied, and that's going to keep prices down," said Matt Smith, director of commodity research at Kpler. "But we could see prices start to rebound in the fourth quarter, as demand picks up for heating."
The decline in natural gas prices is a boon for consumers, who will see lower bills for their heating and cooking needs. However, it is a blow to the natural gas industry, which has been struggling with low prices for several years.
The industry has been cutting jobs and production in recent months, and some analysts say that more layoffs are likely in the coming months.
"The industry is in a very tough spot," said Smith. "We're seeing a lot of job cuts, and we could see more in the future."
The decline in natural gas prices is also a reminder of the importance of energy diversification. The United States is increasingly relying on natural gas to meet its energy needs, and the recent decline in prices shows that the country is vulnerable to price fluctuations.
"We need to diversify our energy portfolio," said Smith. "We can't rely too heavily on any one source of energy."