Natural gas prices have taken a tumble once again and are now sitting right at the December 2015 lows. After a small relief rally during the Christmas period (due to higher winter demand) prices have once again fallen and many natural gas bears are making the call for a sub two dollar gas price.

Although the USA suffered from one of the worst snowstorms in recent history, warmer weather is predicted to follow. All in all, winter in the USA has not been too tough, hence less demand for natural gas. We are now approaching the spring period when seasonal demand naturally falls away.

With the weakness of prices and spring around the corner, many involved in the natural gas industry are forecasting lower prices in the short term.

Beth Sewell, managing partner at Quantum Power & Gas Services, said “Expect to see sub-$2 natural-gas prices in February, and they may even drop to $1.50 depending on the weather as the market enters the “spring shoulder period.” (quote:MarketWatch)

The long-term gas futures chart shows us that the price has not settled below $1.50 since 1995.

However, there may be some respite for those weary gas producers to come. Traders and producers will be keeping a close eye on the Energy Information Administration’s report, which forecasts a return to rising prices with the rise in consumption over the next two years.

The EIA expects prices natural gas to rise and hit $2.65 per million British thermal units. It also sees a rise to $3.22 for 2017, due to the change of industrial use of gas which is growing faster than can be produced.

Add to this the fact that shale gas production seems to have peaked and passed during 2015. With many rig counts fallen by 30%. These lower natural gas prices mean that many shale gas producers are running at a loss, with many needing a price of $3-$4 just to break even. It has been stated by many commentators that the only reason these companies have not cut their production is because they have huge debts which need serviced. If they cut production they simply won’t have the means to pay off debt and will go out of business.