El Nino and record supply are affecting US natgas price this winter
Analysts said that US natural gas will be cheaper than last winter due to a strong El Nino climate pattern, which is expected to curb demand, and the?ample supply of gas, which keeps supplies balanced.
Gas prices that are lower during the peak heating season of December to February could help consumers save money on heating and keep electricity prices in check. This would be a relief for them as inflationary pressures continue. Gas-fired power plants account for about 40% of US electricity generation.
The average price of gas futures contracts at the New York Mercantile Exchange from December 2026 to February 2027 is $3.49 per million British Thermal Units (mmBtu), down from $3.96 during the same period in winter 2025-2026.
Gas futures are currently trading at around $3.04 per Million British Thermal Units (mmBtu).
The US gas production is on track to reach record levels for the second consecutive year. This will be up by about 4% from its current all-time annual high of 107.6 bcfd (bcfd). This will help keep the inventories well stocked heading into winter heating season.
El Nino, which is a weather pattern that causes the surface waters of the central and eastern Pacific Ocean to warm up, could also bring higher temperatures than normal in key heating markets in the north and reduce residential and commercial demand.
"Domestic Demand could be lower than normal if El Nino conditions result in a mild winter." The warmer than normal weather that is expected in October and November may also extend the injection season, allowing inventories to be in a comfortable position going into winter. Guernsey and Company, Oklahoma City.
Zhu estimates that the US Henry Hub benchmark gas prices in Louisiana will average $3.50/mmBtu between December and February. This is about 12% lower than last winter's price.
Bank of America analysts said this week in a report that a mild winter due to a strong El Nino could further lower gas prices, as well as delays in US LNG exports or higher than expected gas production from the Permian Shale of West Texas and Eastern New Mexico.
AMPLE SUPPLY SETS STAGE WINTER
Henry Hub spot prices were $2.93 per million Btu between June and August. This is 6% less than the same period in 2013. Increased renewable generation, record production of gas, and ample inventories all helped to limit prices.
Since?March, the amount of gas stored has remained above average levels. Gas inventories were about 3% higher than normal for this time of the year.
Robert DiDona of Energy Ventures Analysis said that if demand is below average due to warmer weather caused by El Nino then a price drop would not be surprising.
As for the price, it is anticipated that the growing domestic and export demand will absorb some of the extra supply. The weaker heating demand should also limit the downward pressure on prices.
U.S. LNG is expected to export 1.5-2.0 billion cubic feet per day more than last winter. According to John Paisie of Stratas Advisors, the president of Stratas Advisors, rising?electricity demand, including that from data centers, may increase?gas demand in the power sector by 0.5-1.0 bcfd.
The increase in LNG exports, and the power sector demand, should help offset some of the decrease in heating demand due to El Nino. Paisie stated that they will not be able to offset the effects of a warmer winter.
(source: Reuters)
