Energy Solutions, Inc. Identifies Weather as Major Natural Gas Price Driver
Above-normal temperatures this winter dramatically reduced heating demand needs, leaving storage inventory levels at record highs for this time of the year. The current widespread above-normal temperatures, which are forecasted to linger through the end of March, are only making the outlook for producers bleaker.
Valerie Wood, President of Energy Solutions, Inc., explains, “Lack of natural gas demand from the electric generation sector for either heating or cooling needs means that storage inventory levels likely will build at a rapid pace this spring. If storage levels build too quickly, there will be nowhere to put excess gas supplies later in the summer; which could result in mandatory production shut-ins.”
About the only factor that can save this market from such a fate is if Mother Nature delivers hotter-than-average temperatures this summer, which is not on the horizon; then again, neither was this past winter. In fact, most meteorologists predicted a winter that would be colder than average. While bits and pieces of various forecasts did turn out to be accurate, no meteorologist accurately predicted the oddities of the winter of 2011-2012.
Looking ahead, the National Oceanic and Atmospheric Administration (NOAA) forecasts that above-normal temperatures will linger into May for the eastern half of the nation and the southwest. This could prompt an increase in natural gas demand from the electric generation sector as air-conditioning needs increase a bit earlier than normal. At this point, that is not viewed as a concern, given the high storage and supply levels. Nor is it likely to be a problem in the near future; most meteorologists are calling for a moderate summer, which would result in less air-conditioning demand than usual.
Relative to projected price impacts, Wood explained, “The widespread warmer-than-normal weather in what is called a “shoulder” month leads to a decrease in natural gas demand and a surplus of supplies. For now, the warmer-than-normal temperatures are expected to depress spot market natural gas prices, pulling down the front-month natural gas NYMEX price as well.”
Additional information about price trends, natural gas storage inventories, demand issues, production levels, rig counts, and much more can be found in the Monthly Edition of The Advisor. Take a FREE, no-obligation 60-day trial to The Advisor and receive the most recent Weekly Edition, as well as the Monthly Edition for March, which contains additional insight into bearish, bullish and neutral factors that affect pricing within the Natural Gas Industry. Learn more by visiting www.energysolutionsinc.com.
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About Energy Solutions, Inc.
Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 50 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.