The price of natural gas has more than doubled since the start of the new year, but a hot summer could send them soaring another 25%.
Amid the 4% rise in gas prices, in the futures market, the hot spring weather in the United States has placed further pressure on a market that is already concerned with tight supplies, according to CNBC. The U.S. Energy Information Administration (EIA) says, "hot weather tends to increase demand for air conditioning in homes and buildings, which generally increases the power sector's demand for natural gas."
Matt Palmer, the senior director of North American natural gas at S&P Global Commodity Insights, says, "in the last month, there has not been a meaningful uptick in [the] U.S. lower 48 states production. You're seeing exports running full out on liquid natural gas [LNG]; power burn from the power sector is really strong and layers in the heat. And the expectation that the southern tier of the continent in May and June will see well above normal temperatures is recipe for higher prices."
So far for the year, natural gas futures are up 137% and were trading at about $8.30 per million British thermal units (MMBtu). And now, on Tuesday, the National Weather Service is reporting that high temperatures are forecasted to be tied or broken this week in Texas, Oklahoma, and Louisiana.
Palmer said that when natural gas prices surge, utilities typically switch to coal for power, but now they find that even coal is more expensive — the equivalent of gas at $9 to $10 MMBtu.
"The likelihood of prices in the double digits this summer is getting stronger by the day," Palmer adds.
of prices in the double digits this summer is getting stronger by the day," Palmer adds.