Balmy US Winter Sends Natural Gas Prices Plummeting

Supply is outstripping demand as a warm season has meant less need for heat.

A natural gas power plant.
Photo via ReAl

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At this rate, why even bother wintering in Florida?

After the warmest winter since at least the 1950s, natural gas prices in the US have experienced a freefall to their lowest levels in about three decades, according to an analysis over the weekend by the Financial Times. A surge in production hasn’t helped the supply-demand equation, either.

Is this Gaslighting?

Global temperatures are up across the board. According to not-so-comforting data this month from the Brussels-based Copernicus Climate Change Service (C3S), the 12 months between February 2023 and January 2024 marked the first-ever such period in which the average global temperature hit 1.5 degrees Celsius above pre-industrial levels — the critical threshold outlined in the 2015 Paris Climate Accords for averting the worst effects of climate change.

In the US, the December-to-February period is on track to be the warmest on record, likely 3% higher than the previous record set in 2015-16, according to the Commodity Weather Group. Among the many costs of climate change are energy companies’ once-reliable winter revenue:

  • Benchmark Henry Hub natural gas contracts for March went for $1.61 per mn British thermal units at the end of Friday, a more than 50% drop from mid-January levels.
  • That’s good for the lowest closing price on month-ahead contracts since 1995, per the FT’s analysis — save for that brief, magical moment of virtually free energy prices at the outset of the Covid-19 pandemic.

Pedal to the Metal: Supply is firmly outstripping demand as US gas production hit a record 105 billion cubic feet a day in December. After slightly dipping in January, production has hit the same high so far through February, and inventories are now 11% higher than a year ago and 16% higher than the five-year average, according to the US Energy Information Administration. The fossil fuel industry that helped send temperatures soaring, in other words, is sleeping in the bed it made.