As 2022 drew to a close, the price of US natural gas fell to a level not seen since March with milder January weather forecasts easing demand for the commodity.
During the second day of trading in 2023, US natural gas futures were down more than 9% over two trading days, to a 10-month low of $4.04 per million British thermal units (MMBtu).
Despite a 12-session run during which the price fell by nearly 36%, US natural gas futures were still up more than 30% in 2022.
Natural gas prices in Europe also traded lower at the end of the year. On Tuesday, the Dutch TTF price stood 1.6% lower at €75.54 per megawatt hour (MWh) - its lowest level since mid-February 2022.
Record LNG imports from the US and good stockpiles have helped ease the bloc’s demand concerns. Milder weather also weighed on TTF prices as it assisted the continent with maintaining reserves.
Piero Cingari, market specialist at Capital.com, recently highlighted how US natural gas prices have actually exhibited very low average returns during the winter and coldest months of the year (December, January, and February), despite the fact that household consumption for heating is highest during this period.
He analyzed data over the past 30 years and further explained why this is the case.
“Actually, when heating demand drops, natural gas prices rise. The two strong quarters for US natural gas prices are from March to May and from August to October, with September being the best month in terms of average returns. So, what causes this peculiar seasonal pattern? Natural gas prices tend to rise during the refill season. Demand for natural gas increases as a result of the need to restock supplies in advance of the winter months, pushing the price of the commodity higher.
The winter demand spike can usually be met with a high level of gas reserves, barring major and protracted frosts, which may sometimes cause some price pressures
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