The hot weather of August has helped natural gas prices climb by 75% since the end of June when they hit their lowest level since 1995.
But as of Friday, prices hit a nine-month high of $2.579 per MMBtu, thanks mostly to the scorching weather in July and August. Natural gas prices rose as air conditioning user went up along with the temperatures.
With the updated weather data revealing an ongoing bullish pattern extending into September — particularly in west and southwest — cooling loads should experience a consistent upward spike according to Zacks.
The extension of summer heat has translated into the burning of more gas to feed higher electricity consumption for air conditioning. According to the EIA’s latest Short-Term Energy Outlook, natural gas’ share of electricity generation would rise to 40% this year from 37% in 2019. Therefore, as Americans crank up their air conditioning to combat hotter-than-normal weather, companies in the natural gas industry stand to make more money.
This should also significantly reduce the current inventory surplus that remains bloated due to a combination of weak consumption from a warmer-than-expected 2019-2020 winter, coronavirus-induced drop off in usage and a dip in volumes flowing to LNG export plants. As of Aug 21, natural gas stockpiles held in underground storage in the lower 48 states stands at 3.420 trillion cubic feet (Tcf) — 580 Bcf (20.4%) above the 2019 levels at this time and 438 Bcf (14.7%) higher than the five-year average.