Today's Major Market Move: Natural Gas Futures Down 35% Year to Date

Natural Gas front month futures dropped through the psychologically import $2 level a little over a week ago so we figured it was about time that we dedicated a post to the colorless, odorless substance. It's not like we've been ignoring the commodity; we've featured it as the topic of our "Major Market Move" post already five times this year. The 35% drop in price year-to-date makes it the biggest decliner in the commodity space. Here's the top 10:

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If the 35% decline isn't dramatic enough for some readers, all they need to do is look back to June 2011. Natgas reached a price of 4.82 per million BTUs, its high for 2011, and is currently down over 60% from that point.

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Storage capacity continues to fill up with the EIA reporting 25 billion cubic feet of gas being stored last week, above the 23 bcf estimate. After the storage facilities are topped out, gas is then kept in the pipelines for storage. After the pipelines... it's either A) cap the well which is not a trivial process, B) flare the gas off providing a nice light show for nearby residents or C) sell the gas directly on the open market. If C) happens in any kind of reasonable volume, those attempting to catch the falling knife right now will most likely end up losing a few fingers or even a limb. In the near term, without temperatures rising significantly to increase energy demand, traders expect prices to grind lower. Here's some more color from the Dow Jones news wires via the WSJ:

Traders said prices now appear on target to test the $1.85/mmBtu level, last reached in September 2001.

Gene McGillian, broker and analyst at Tradition Energy, said the market looks likely to continue to "grind into new 10-year lows" and stay weak for the next six months, barring a summer demand spike or significant cutbacks in output.

The EIA data "does nothing to alleviate the glut of supply we have and there's no sign of producers letting up yet" on lofty output, he said.

In a three-month forecast for May through July, the National Oceanic and Atmospheric Administration said Thursday that above-normal temperatures are expected to stretch from the southwest across to much of the East Coast.