• 3 minutes Nucelar Deal Is Dead? Iran Distances Itself Further From ND, Alarming Russia And France
  • 5 minutes Don Jr. Tweets name Ukraine Whistleblower, Eric Ciaramella. Worked for CIA during Obama Administration, Hold over to Trump National Security Counsel under Gen McCallister, more . . . .
  • 9 minutes Shale pioneer Chesepeak will file bankruptcy soon. FINALLY ! The consolidation begins
  • 12 minutes China's Blueprint For Global Power
  • 7 hours EU has already lost the Trump vs. EU Trade War
  • 1 hour Pioneer's Sheffield in Doghouse. Oil upset his bragging about Shale hurt prices. Now on campaign to lower expectations, prop up price.
  • 17 mins Science: Only correct if it fits the popular narrative
  • 3 hours ''Err ... but Trump ...?'' *sniff
  • 44 mins China's Renewables Boom Hits the Wall
  • 4 mins What are the odds of 4 U.S. politicians all having children working for Ukraine Gas Companies?
  • 6 hours Tesla Launches Faster Third Generation Supercharger
  • 15 hours Who writes this stuff? "Crude Prices Swing Between Gains, Losses"
  • 7 hours Passerby doused with flammable liquid and set on fire by peaceful protesters
  • 5 hours Crazy Stories From Round The World
  • 1 day Haaretz article series _ Saudi Arabia: A Kingdom in Turmoil | Part 1 - Oil Empire

Breaking News:

Russia Plans To Boost Crude Oil Exports

Alt Text

Could The Aramco IPO Kill OPEC?

If the Aramco IPO does…

Alt Text

The $75 Billion Indicator That Might Reveal Aramco’s True Value

Saudi Aramco’s much-anticipated initial public…

Alt Text

In Pursuit Of The Perfect Fuel

Dark matter is arguably the…

Andrew Topf

Andrew Topf

With over a decade of journalistic experience working in newspapers, trade publications and as a mining reporter, Andrew Topf is a seasoned business writer. Andrew also…

More Info

Premium Content

No Polar Vortex-Effect Expected This Winter For Natural Gas

As they say in Game of Thrones, “winter is coming.”

In the popular TV series, winter carries a foreboding connotation, but in the real world, the icy fingers of Jack Frost can be a veritable bounty for natural gas investors – who know the market for natgas is heavily weather-dependent.

Take last year, for instance. In January 2014, a blast of freezing-cold Arctic air descended on North America, causing demand for the home-heating and industrial fuel to skyrocket. The “polar vortex” resulted in seven out of the 10 biggest demand days on record for natgas; last January, 241 billion more cubic feet than any other month on record were consumed, according to Bentek, a unit of Platts.

Of course, higher consumption had the predicted effect on prices. Between November 2013 and March 2014, the price of natural gas soared 67 percent. Investors who saw the opportunity in the unusually cold weather by investing in natural gas futures booked some handsome profits. The question is, will it happen again this year?

While no-one can accurately predict the weather, judging from the market as it currently stands, a repeat of 2014's polar vortex-effect is unlikely.

A shock of cold weather earlier this month briefly whisked natgas over $4.50 per million BTU, a four-month high. But the price rapidly fell to its normal $3 to $4 dollar range, as the forecast for wintry weather in the U.S. eased.

Analysts say the price also dipped because natgas prices are closely correlated with the oil price, which has been falling alongside prices of heating oil and unleaded gasoline.

Looking ahead, it appears that while more cold air is likely to settle in as winter advances, that's already been priced into the market, at least in the short term.

"Another impressive cold blast will impact much of the eastern U.S. early next week with widespread sub-freezing temperatures and areas of snowfall. This doesn't appear to interest the markets as they are more focused on what happens late next week and beyond, which is a transition to milder U.S. weather systems as a strong Pacific jet stream crashes into the western U.S.," Natgasweather.com reported last Thursday.

In other words, don't expect a repeat of that $4.50 mmBTU spike.

And then there's supply.

During the winter of 2014, inventories of natural gas held in storage were drawn down significantly to meet demand, but over the summer, producers have been busy directing new gas to storage facilities in preparation for the winter draw-downs.

The Energy Information Administration provides weekly data on natural gas storage levels, and according to the latest report on Friday, the previously tight gas market has loosened up quite a bit. The EIA said natural gas inventories rose by 40 billion cubic feet, although they remain about 6.2 percent below a five-year average.

The EIA thinks the 3.6 trillion cubic feet (tcf) of gas in storage when the “U.S. heating season” kicked off in November will be enough to sustain the market through a “normal” winter.

Barring the kind of cold snap North America saw last winter, the EIA expects inventories to be drawn down to 1.562 tcf by the end of next March, Platts reported last week. Compare that to a skimpy 857 billion cubic feet of gas left in storage at the end of March 2014, the lowest level since 2003.

So what does it all mean for prices? The EIA expects the Henry Hub spot price to average $3.97 mmBTU in 2015, compared to $4.53 last winter.

"This price forecast reflects both lower expected heating demand and significantly higher natural gas production this winter," the report states.

Winter is indeed coming, but it seems natural gas supplies are ready for it.

By. Andrew Topf of Oilprice.com




Download The Free Oilprice App Today

Back to homepage



Leave a comment
  • Sollozzo on November 17 2014 said:
    When did you write this article? As the prices were spiking to 4.30+ today?? So the meat of this article is, do not expect NG to go another 20 cents, despite the pending withdraw report this Thursday and failure to catch up with the 5 year average. Appreciate the info, timing of this article is pretty bad, predicting NG movement is impossible. Words echo hard of someone who is short NG.
  • Ron Wagner on November 17 2014 said:
    Why do we not have a larger storage capacity filled when we are planning on exporting? Does that present a problem?
  • NG Mike on November 17 2014 said:
    People may consume the same, but demand is growing as new homes and industries choose nat gas.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play