The threat of sky-high heating bills is melting away.
Unusually warm weather pushed U.S. natural gas futures down 11.5% on Monday to $3.657 per million British thermal units. That is down more than 40% from October’s peak, erasing a run-up that stoked fears of exorbitant heating bills biting into household budgets and manufacturers’ balance sheets already stressed by broad inflation.
The climb in price has reversed thanks to an uptick in domestic production and the unseasonably warm weather that has delayed heating season in much of the country.
Monday’s sharp decline came after forecasts showed another burst of warm weather settling over much of the country next week, eliminating a lot of demand for the power-generation and heating fuel. Meager autumn consumption has allowed stockpiles that were drained by summer’s record heat to recover before furnaces and boilers start blasting.
Gas bulls might dream of a white Christmas, but fresh forecasts for between now and then call for weather so warm that trading firm EBW Analytics Group estimates that there will be 35 billion cubic feet less demand this month than had been expected on Friday. That “suggests that the massive move lower is set to continue,” said EBW analyst Eli Rubin.
U.S. prices began the heating season at their highest level since frackers flooded the market with cheap shale gas more than a decade ago. A lot of gas was burned for air conditioning to combat the record summer heat and to make up for lost hydropower output. Meanwhile, low inventories in Asia and Europe touched off bidding wars for U.S. exports of liquefied natural gas, or LNG.
The EIA warned that winter heating bills could rise by hundreds of dollars compared with last year in the event of a cold winter. It forecast natural gas prices to average $5.67 this winter, an 86% increase from a year ago. Legislators urged federal aid programs to open their purse strings to help the poor stay warm.
Analysts and traders say it is still possible for prices to jump if there is a prolonged cold snap. Even after the recent selloff, natural gas futures remain about 50% more expensive than a year ago. Plus, pipeline constraints have made price spikes commonplace when winter storms freeze big cities and places not accustomed to cold. Still, Wall Street is lowering its price forecasts in light of the balmy