Big Data Download

The real price of chilly weather

Big Data Download

The chill in the air will keep the barometer low and prices high, according to Teri Viswanath, director of commodity strategy at BNP Paribas.

In December, Viswanath told Big Data Download a 20-percent runup in U.S. natural gas prices since the start of the heating season was due to extremely cold weather.


Bitter temperatures have returned to the Northeast, pushing prices higher by another 10 percent.

“The continuation of very cold weather has forced the industry to withdraw a significant volume of gas out of storage to meet rising heating demands,” said Viswanath. “The market has reacted to this fast depletion in inventory levels by bidding up the front of the curve.”

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The summer period, which runs from April through the end of October, is typically the time where we replenish those winter inventories, but this year might be different. Viswanath said the industry will head into the warm season with the lowest storage levels since 2008. 

In order to replenish inventories, Viswanath said, marginal production will be called upon.  “With a five-fold increase in supply elasticity, we see the U.S. newfound shale resource base being called on for new supplies,” said Viswanath.

 

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