US Natural Gas Demand Set To Climb As Cold Weather Approaches

In the United States, the price of natural gas increased on Tuesday as a result of a forecast for an impending cold snap that suggested increased demand for the commodity.

However, as mild weather rolled in and storage levels were above the five-year normal on Wednesday morning, natural gas prices were once again declining.

Due to the cold snap that is anticipated for the last week of January, there will be some upward pressure on U.S. natural gas prices throughout the month.

Even after a brief uptick, natural gas prices in the US are still significantly lower than they were the previous year when they briefly approached $10 per million Btu as U.S. LNG shipments set record after record to meet Europe's gas demand.

Natural gas futures were trading at roughly $3.7 per mmBtu on Tuesday, the opening trading day of this week in the United States.

These costs plummeted below $3.5 in the wee hours of Wednesday.

This weekend, as Arctic cold moves down into the United States, notably into the western and central regions of the country, the weather forecast that drove up natural gas prices will start to manifest.

“Cold air will finally advance into the East next week, resulting in below normal temperatures covering most of the U.S.,” helped by “several reinforcing cold shots into the northern U.S.,” NatGasWeather said, as quoted by Natural Gas Intelligence.

Given that supply is still rising and that price growth is being constrained, the cold period will most likely only have a short-term impact on gas prices.

However, as Reuters noted earlier this month, given how much prices have dropped recently, there may be a limit to the expansion of production.

The expected growth in U.S. natural gas production for both this year and 2024 is 2%.

If prices continue to be low, producers can become dissuaded from increasing production in a market that may well soon go into oversupply.

"2023 is gearing up to be oversupplied by more than 5.0 bcfd (billion cubic feet per day), which justifies the downward trend in prices," an energy consultant from East Daley Capital told Reuters.