Nearing 15 year high, natural gas prices susceptible to early season cold risks.
By Bret Walts
A powerful cold front has passed through the Central and Eastern United States, leaving behind the first taste of cooler, fall air this season. The autumn season may have just kicked off, but the blast of cooler air is an important reminder than winter looms just around the corner. With normal temperatures steadily falling as we work into October, heating demand will be on the increase as folks across the country flip on the furnaces for the first time since early this spring. How active those furnaces and the usage of natural gas are later this fall and winter could have a particularly big impact on the energy markets this year.
Senior Market Analyst with The PRICE Futures Group, Phil Flynn, notes significant differences as we work into this season of heating demand compared to last year.
“Currently, the supplies of natural gas are 16% below a year ago and 6.9% below the 5-year average,” Flynn stated. “Demand for natural gas is strong and supplies are tight around the globe.”
Flynn also notes that Hurricane Ida produced damage to production areas in the Gulf of Mexico. The recovery of that production may come down to how early winter evolves. “It is unlikely that we’re going to see production bounce back quickly enough to meet demand if winter is cold,” Flynn expressed.
BAM’s initial December and Winter Outlook is currently available on BAMWX.com and the Weather Porthole App. Preliminarily, BAM is forecasting higher gas weighted heating degree days than both the 10 and 30-year average totals with slightly cooler than normal temperatures across the Northern US into the Great Lakes. According to Flynn, if this forecast verifies it could easily be problematic.
“The price of natural gas is almost at a 15-year high for this time of year,” Flynn said. “In other words, we’re already pricing at winter and winter isn’t even here yet. When winter does show up, we could see these prices very easily get in the area of $8 this winter.”
As we get closer to winter, BAM’s meteorologists will begin to pick out the potential for any arctic blasts of air related to breakdowns of the Polar Vortex. If a more notable arctic blast could develop for a period of time this winter, Flynn believes prices have the potential to spike to $10.
BAM’s team will have more details on the heating demand forecast breakdown and the potential for arctic blasts in the annual Winter Weather Webinar on Wednesday, October 27th, 2021 at 11AM ET. The webinar is free to view and anyone can sign up at BAMWX.com/webinar. A recording will be provided to those that sign up but cannot make the 11AM ET live broadcast.
