Natural Gas Price Forecast For Winter 2016

Natural Gas Price Forecast For Winter 2016

Winter is coming and many Americans naturally feel uncertainty and possible anxiety over their utility bills. We’d like to help demystify that for you. If you heat your home with natural gas, several factors affect the price tag on your heating bill. On the supply-side, rate of production, net imports, and underground storage levels have an impact. Meanwhile, on the demand side, the state of the economy, weather forecast and surprisingly even current oil prices affect natural gas prices.

Affect of Weather on Natural Gas Price

Natural Gas Price ForecastAs you could likely surmise, the biggest factor to play a role in the fluctuation of natural gas prices are winter and summer weather conditions.

The northeast is particularly challenged by winter weather due to the high population in a concentrated area demanding access to heat. That’s why natural gas pipelines are so important: It helps to be proactive in creating access to energy such that a dip in temperature doesn’t leave people stranded without heat and power.

Let’s rewind to 2014 when the winter season had its icy and frigid grip around most of the country, resulting in one of the coldest winters on record for many areas. The freezing temperatures caused natural gas prices to soar into record highs because of the sudden increase in demand. Last year, in contrast, was a fairly mild winter for gas prices. Moving forward to this coming winter forecast, will 2016 bring us a polar vortex that adversely affects access and pricing?

Affect of Inventory on Natural Gas Price

natural gas in underground storageWhile last year gave us a mild winter, the National Oceanic and Atmospheric Administration (NOAA) forecasts that this coming winter will be even more temperate, in stark contrast to the winter of 2014. With mild temperatures so far this autumn, pipeline construction companies have assisted to increase the amounts of natural gas in storage. According to the U.S. Energy Information Administration, storage levels are currently at a 5 year high which means consumers will have more than enough gas this winter.

Natural Gas Price Forecast – What it All Means

So, what does all of this mean for the 61 percent of U.S. households who rely on natural gas as their primary energy source? Warmer weather and a large storage buffer of natural gas translate into less natural gas demand, greater natural gas supply, and therefore lower prices. The average household heated primarily with natural gas will pay about $578 this winter, which is $63 less than last year, according to the Energy Information Administration’s Short-Term Energy and Winter Fuels Outlook.

Various news outlets are hesitant to accept this winter’s forecast since global atmospheric conditions could change things in an instant. However, other experts state that a frigid repeat of 2014 weather is not likely. And even if it did, price increases should be moderate and short-lived due to excess storage levels. In the end, it all depends on how the weather conditions actually play out and which consumers are using oil versus natural gas to heat their homes.

Weather can certainly change – but for now, 2016 is looking steady in terms of the natural gas supply and pricing predictability.