Cooler Weather Forecasts Lead to Lower Natural Gas Prices

The price of natural gas has hit a sixth-month low due to forecasts of cooler temperatures in the near future. This is due to the fact that investors expect the demand for natural gas to decrease as consumers utilize less electricity. According to a recent article from the WSJ:

Prices for the front-month August contract fell 18.1 cents, or 4.1%, to $4.225 a million British thermal units on the New York Mercantile Exchange. It is the lowest closing price since Jan. 10 and the biggest one-day drop since Feb. 26.

Cooling patterns expected to hit the Midwest and Northeast over the next six to 10 days have investors betting utilities won’t need to burn as much natural gas in the weeks ahead, as summer demand for electricity to run air conditioners eases.

Beyond the decrease in the price, the cooler temperatures have also been beneficial for natural gas reserves as well. The decreased summer demand has made it so that more natural gas is able to be stored for the months ahead. According to the WSJ, this is helping to make up for the shortage that occurred this summer:

The absence of extreme heat has helped producers chip away at a record natural-gas shortage following last year’s unusually severe winter. Last week, the U.S. Energy Information Administration reported an eighth consecutive week of producers adding more than 100 billion cubic feet of natural gas to storage.

This is beneficial as it has the potential to mitigate a large scale price increase this upcoming winter. As natural gas is able to be stored now, producers are able to get caught up, making it so that they might be able to better meet the demand of the winter. In turn, this will allow consumers to potentially pay less for natural gas in the future.

Read More- “Natural Gas Prices at Six-Month Low on Cooler Weather Forecasts” (Daniel Huang, The Wall Street Journal)

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A rising senior at Colgate University, John is currently working as a research fellow with Consumers' Research.

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