Over the last 2 weeks, we have seen natural gas futures lose ground. However, in the last 24 hours, we have seen a switch to an upward trending market during yesterday trading session. Overnight trading sent the October 2020 natural gas futures as high as $2.32/MMBtu. This jump in the October 2020 natural gas futures pricing was almost 20 cents higher than when the market closed yesterday, September 23, 2020. The factors below are continuing to drive up natural gas prices and continue the volatility that we are seeing in the natural gas market:
Weather – Even though fall officially arrived on Tuesday, September 22, 2020, the National Oceanic and Atmospheric Administration, NOAA.gov, is predicting warmer than normal temperatures over the next 3 months (see the attached graphic for October 2020 through December 2020 temperatures). As of September 23, 2020, with more than 2 months left in this year’s hurricane season, the Atlantic has spouted 23 named storms. This is roughly double its long-term average for an entire hurricane season. Also, for only the 2nd time in history, the National Hurricane Center exhausted its regular list of 21 names. That is the reason why the latest storm, Beta, was named by using the Greek alphabet. We are also seeing the effects of climate change with the recent hurricane season. The heavier rains, slower movement and rapid intensification are just some of those signs.
Demand – Over the past week, natural gas demand fell due to temperatures averaging 65 to 70 degrees Fahrenheit across most of the lower 48 states. This reduced the need for cooling demand and energy consumption. Natural gas consumption for power generation declined by 6.9% week over week. There is still concern that the decline in natural gas production due to the weather in the gulf of Mexico will cause an increase in pricing, which we are seeing in the December 2020 through March 2021 natural gas futures.