Energy Solutions, Inc. – Unusual Temperatures Cause Uncertainty within Natural Gas Market

This winter’s record warmth has slowed natural gas demand and increased the huge glut of natural gas in storage. Looking ahead, meteorologists forecast that this summer could be the third summer of a La Niña cycle, and history says the third summer of a La Niña cycle is generally cooler than the two before.

If this forecast materializes, it means a lower seasonal utilization of natural gas fired-electric generation to meet air-conditioning needs, and so it will take longer to work through the year-over-year storage inventory surplus.

Relative to weather-driven natural gas demand, according to the U.S. Army Corps of Engineers, hydropower output in the Pacific Northwest has been about 25 percent below last year’s levels. A lack of available hydropower puts an increased emphasis on the use of natural gas-fired electric generation.

In addition, demand for propane and heating oil has been declining as more residential users switch to natural gas, particularly in the Northeast. New home starts could begin to rebound as soon as later this year, and almost certainly in 2013; this should increase residential and commercial demand for natural gas.

In the February 2012 Monthly Advisor, Valerie Wood, President of Energy Solutions, Inc., in Verona, Wisconsin, stated that relative to weather-driven price impacts, “Shifting temperatures will have only minimal short-term impacts on natural gas prices. Winter is almost over, so cooler-than-average temperatures at this point will not derail record-high storage inventories. Similarly, hotter-than-average summer temperatures also will have minimal impacts because there is more-than-adequate supply available to meet changing demand caused by weather fluctuations.”

Additional information about price trends, natural gas storage inventories, demand issues, production levels, rig counts, and much more can be found in the Monthly Edition of The Advisor. Take a FREE, no-obligation 60-day trial to The Advisor and receive the most recent Weekly Edition, as well as the Monthly Edition for February, which contains additional insight into bearish, bullish and neutral factors that affect pricing within the Natural Gas Industry. Learn more by visiting www.energysolutionsinc.com.

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About Energy Solutions, Inc.
Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 50 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.