When US natural gas futures passed a milestone this month, they did so quietly: volatility fell to the lowest levels since the market’s debut nearly 30 years ago. The event seemed improbable. Volatility usually fades when commodity stocks are ample. Yet US gas stocks are 19.5 percent below average.
When the winter starts they are set to be at their lowest in more than a decade. This situation is the latest example of how the world’s largest gas market has been transformed by shale drilling. While demand for gas is galloping, it has been met by waves of supply that show no sign of abating. Conditions that put traders on edge a decade ago get shrugs. Like much of the northern hemisphere, the US this year is experiencing extremely hot weather.
Cooling degree days — a measure of air-conditioning demand — are expected to top 1,000 by the end of the season, ranking the summer of 2018 among the top five for heat, according to Commodity Weather Group. That has required more generation from electric power plants that increasingly run on gas. Natural gas “power burn” surged to a record 37.7bn cubic feet per day during July, according to S&P Global Platts.