Gas Prices Soar, Crash, with Covid, Climate Wild Cards

December 8, 2021

See the other piece on this page. Good luck predicting what’s going to happen this winter – but following the gyrations of the gas market this fall has been a reminder that gas markets have been historically volatile, and that now, with increased export of Liquified Natural Gas, US consumers will be permanently exposed to global price pushes and pulls.
And that – will be another driver towards the energy transition.

Wall St. Journal:

The threat of sky-high heating bills is melting away.

Unusually warm weather pushed U.S. natural gas futures down 11.5% on Monday to $3.657 per million British thermal units. That is down more than 40% from October’s peak, erasing a run-up that stoked fears of exorbitant heating bills biting into household budgets and manufacturers’ balance sheets already stressed by broad inflation. 

The climb in price has reversed thanks to an uptick in domestic production and the unseasonably warm weather that has delayed heating season in much of the country.

Monday’s sharp decline came after forecasts showed another burst of warm weather settling over much of the country next week, eliminating a lot of demand for the power-generation and heating fuel. Meager autumn consumption has allowed stockpiles that were drained by summer’s record heat to recover before furnaces and boilers start blasting.

In early September, when the prices took off, the volume of gas in domestic storage facilities was 7.4% below the five-year average inventory, according to Energy Information Administration data. As of Thanksgiving, the deficit was down to 2.4% and analysts see it shrinking further.

Gas bulls might dream of a white Christmas, but fresh forecasts for between now and then call for weather so warm that trading firm EBW Analytics Group estimates that there will be 35 billion cubic feet less demand this month than had been expected on Friday. That “suggests that the massive move lower is set to continue,” said EBW analyst Eli Rubin.

U.S. prices began the heating season at their highest level since frackers flooded the market with cheap shale gas more than a decade ago. A lot of gas was burned for air conditioning to combat the record summer heat and to make up for lost hydropower output. Meanwhile, low inventories in Asia and Europe touched off bidding wars for U.S. exports of liquefied natural gas, or LNG. 

The EIA warned that winter heating bills could rise by hundreds of dollars compared with last year in the event of a cold winter. It forecast natural gas prices to average $5.67 this winter, an 86% increase from a year ago. Legislators urged federal aid programs to open their purse strings to help the poor stay warm

Washington Post:

Wednesday brought the warmest December weather on record in Washington state, Montana, Wyoming, North Dakota and Canada as a sprawling heat dome spread across western and central North America.

These state and national extremes were among scores of records established in the western half of the United States and southwest Canada. It was the first day of meteorological winter (Dec. 1) but felt like mid-fall or mid-spring.

In many areas, it will be even warmer Thursday afternoon. About one-third of the contiguous United States is expected to have highs of at least 70 degrees, which in some places is 30 to 35 degrees above average. At least somewhat above average temperatures are expected almost everywhere.

“Dozens of daily high temperature records could be tied or broken,” the National Weather Service wrote. Oklahoma City, Denver, Kansas City and Omaha are among locations expected to see Dec. 2 records, with highs surging into the 70s.

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