A forecast for a coming cold spell prompted a rise in the price of natural gas in the United States on Tuesday as it pointed to stronger demand for the commodity. On Wednesday morning, however, natural gas prices were falling once again as mild weather set in and storage levels remained above the five-year average.
There will be some upward pressure on U.S. natural gas prices throughout the month as the cold spell is forecast for the final week of January.
Even with a brief rebound, natural gas prices in the United States remain much lower than they were last year, when at one point they flirted with $10 per million British thermal units as U.S. LNG exports broke record after record to satisfy Europe's demand for gas.
On Tuesday, the first trading day for this week in the U.S., natural gas futures were trading at close to $3.7 per mmBtu. In the early hours of Wednesday morning, those prices dropped back below $3.5.
The weather forecast that pushed natural gas prices higher will begin to materialize this weekend, when Arctic weather will move down into the United States and more specifically into the western and central parts of the country.
"Cold air will finally advance into the East next week, resulting in below normal temperatures covering most of the U.S.," helped by "several reinforcing cold shots into the northern U.S.," NatGasWeather said, as quoted by Natural Gas Intelligence.
The cold spell will probably only have a temporary effect on gas prices because production continues to grow and limit the upside potential of prices.
At the same time, with prices so much lower now, there may be a limit to production growth in turn, Reuters reported earlier this month.
U.S. natural gas production this year is seen gaining 2 percent, and another 2 percent in 2024. However, if prices remain low, producers may get discouraged to boost production in a market that may well swing into a surplus soon.
"2023 is gearing up to be oversupplied by more than 5.0 bcfd (billion cubic feet per day), which justifies the downward trend in prices," an energy consultant from East Daley Capital told Reuters.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More