Weather takes the heat out of gas prices

Last week, natural gas prices sank by 12%, the worst weekly loss in a year, on forecasts of unusually warm weather.

Andrew Van Sickle
By
published
in Features

US natural gas prices jumped to a two-year high of almost $4 per million British thermal units (mbtu) late last month. But the rally didn't last long. Last week prices sank by 12%, the worst weekly loss in a year, on forecasts of unusually warm weather. Around 50% of US homes use gas for heating, so winter weather is the main driver of demand.

Last month, freezing conditions meant that 600 billion cubic feet (bcf) of gas were taken out of storage in the three weeks in December, breaking a 20-year record, says Timothy Puko in Barron's. At this stage in the season, 400 bcf would be a typical figure for that timeframe.

Still, another cold spell could lead to a price spike, mopping up more of the gas glut, while structural changes that point to higher long-term prices are "just starting to show their effects", notes Puko. Environmental considerations have spurred a drive to phase out coal-fired power stations, with gas a cleaner alternative. Exports are on the rise, reflecting higher demand from abroad. Weather-related volatility aside, the long-term outlook appears bullish.

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Andrew Van Sickle
Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

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