Just as everyone was breathing a sigh of relief over the retreat in natural gas prices at the end of a frigid winter, it may be time to start worrying again, according to a recent article by CNBC.
The onset of summer means utilities are going to need more natural gas to meet demand for what some forecasters predict will be a sweltering summer, and high summertime demand could set the stages for higher prices next winter, the article states.
Natural gas prices have eased off after Polar Vortex-induced cold sent spot prices soaring to record highs earlier this year, but that relief might not last, and there might be too much optimism about low prices, according to CNBC.
“[Last winter’s] unprecedented cold ‘is leaving a big mark on the U.S. nat gas market,’ Bank of America-Merrill Lynch said in a research note this week, adding that the only way to alleviate tight demand ‘is to force…rationing through higher prices.’,” CNBC reported. “It suggests power users could be in for yet another sticker shock just as they finished paying off winter utility bills.”
The article quotes Richard Hastings, Macro Strategist at Global Hunter Securities about the relationship between summer heat and natural gas supplies for next winter. “There’s a heat wave out of Texas and Oklahoma that is really gathering momentum,” Hastings told CNBC. “If that takes place…and you have enough electric power consumption for nat gas, it makes it really difficult to rebuild nat gas storage.” The situation threatens to push natural gas prices higher next winter, he said.
Natural gas in storage was decimated by the unusually cold winter, reaching an 11-year low in April, when it stood 50 percent below last April’s natural gas supply. Experts have expressed doubts about the suppliers’ ability to rebuild supply in time for next winter.
The article notes that U.S. customers are now paying lower prices for natural gas than consumers abroad, where prices are more than twice as high. “Yet that comes as little comfort for consumers, who saw retail utilities prices soar from December to February—in large part because of spiking nat gas demand,” CNBC reported.
To read the CNBC article, click here.