NatGas Bulls Rejoice: Colder Winter Lower 48 Forecasts May “Place Upward Pressure” On Prices

The Energy Information Administration and the Natural Gas Supply Association recently released reports forecasting colder winter weather trends for the Lower 48. This may suggest heating demand is set to rise and could put a fire underneath NatGas prices, which have been trending in a multi-year slump due to elevated supplies and unusually warm weather. 

Bloomberg cited the EIA report that forecasts NatGas demand among households in the US will be 5% higher based on cold weather predictions for the winter season, adding that households can expect higher power bills in the months ahead. 

“We assume this winter will be colder than the last winter across much of the country, especially in the Midwest,” the EIA said.

Bloomberg commented on NatGas’ sluggish multi-year price action, noting the EIA’s cold weather forecast is great news for energy bulls: 

The gains for demand will be welcome news for natural gas bulls. Prices are sitting almost 20% lower than they were this time last year after an unusually mild winter left swollen supplies in inventory. Production has also been high as drillers cashed in on a massive oil rally, creating more gas output as a byproduct in shale fields.

In a separate report earlier this month, the NGSA wrote that the November-March timeframe will be 7% colder than last year. Based on colder temperatures, the group projects around a 14% increase in residential and commercial demand and a 7% increase in industrial demand. 

“With rising demand expected to place upward pressure on natural gas prices, power demand could decrease compared to last winter’s numbers and less temporary economically-motivated switching from gas-to-coal,” NGSA noted. 

NatGas futures trading in New York has been range bound, oscillating between $3.5/MMBtu and $1.5 for nearly two years. 

Last month, North American Electric Reliability warned that it “remains concerned about maintaining sufficient natural gas supplies to address extreme winter conditions.”

Brrr. Here comes the cold across Lower 48.

Fire up the HVAC or fireplace. 

In mid-August, the 208th edition of the Farmers’ Almanac published the “Wet Winter Whirlwind.” It noted, “There will be a lot of precipitation and storms”—all dependent on location.”

Ahead of winter in the Lower 48 (2023 data via Angi). 

Gary Cunningham, director of market research at Tradition Energy, told Bloomberg that if extreme cold hits, “we could easily” see a record for daily natural gas demand and a spike in cash prices.