Colder Weather in January Supports Higher Natural Gas Prices
Energy News: January 8th, 2024 Colder Weather in January Supports Higher Natural Gas Prices https://youtu.be/IXnryO18Pjs?si=W7AsN_Ld21gv8z9k In our December 18th Energy
Energy News: January 8th, 2024 Colder Weather in January Supports Higher Natural Gas Prices https://youtu.be/IXnryO18Pjs?si=W7AsN_Ld21gv8z9k In our December 18th Energy
Energy News: January 8th, 2024
In our December 18th Energy Update we pointed out in 2020 and 2021 after experiencing warmer-than-normal temperatures in December, Natural Gas rallied into the new year although in both cases they experienced warmer-than-normal temperatures in January. But after further review it became clear warmer-than-normal temperatures in 2020 and 2021 actually started in November.
As you can see in the above chart, Natural Gas rallied into the Fall prior to declining due to the warmer-than-normal temperatures in November and December and then rallied into 2021.
It is fascinating to note that Natural Gas formed a similar pattern in 2021:
Our December 18th Energy Update noted an important observation that in 2020 and 2021 Natural Gas rallied into the new year although warmer-than-normal temperatures continued into January.
Remarkably, Natural Gas is forming a very similar pattern in 2023 with a rally into 2024:
This year the average temperatures were again above normal In November and December, but unlike 2020 and 2021, colder than normal temperatures have returned for most of the United States in January:
In our December 18th Energy Update, we asked if in 2020 and 2021 Natural Gas rallied into the new year with warmer-than-normal temperatures in January, what do you believe Natural Gas will likely do this year if we experience a colder-than-normal January?
Those who believed Natural Gas would likely move higher locked in rates last month before Natural Gas began rallying. But it is important to note from a longer-term perspective, we believe we are still in the early stages of our present bull market cycle.
Since 2000, Natural Gas 4 times declined to where it was in 2023, the average price was always higher longer-term. and although periodically there will be short-term pullbacks, we expect the average price of Natural Gas will be higher 2024 through 2026.
Therefore, if you have not already hedged your cost of Natural Gas or Electricity, we recommend you don’t delay hoping for lower prices, although prices are a little higher than where they were in December, we believe the average price will be higher longer-term, and the upside risk is far greater than the downside reward of waiting hoping for lower slightly prices.
Not every client’s risk tolerance and hedging strategy are the same, but the above report will help you put into perspective the risk/reward opportunities. I invite you to call one of our energy analysts to help you plan a hedging strategy appropriate for your situation.
Ray Franklin
Energy Professionals
Senior Commodity Analyst
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