Natural Gas Market Cycles

Natural Gas Market Cycles

Natural gas prices also follow cyclical patterns:

The seasonal cycle: Homes and businesses rely on natural gas for heating during the colder months, creating higher demand and higher prices during winter. Natural gas is also a popular fuel for generating electricity. So demand for gas also spikes, though to a smaller degree, during warmer months when it is used for electricity generation to satisfy peaks during the cooling season. Demand is generally low during spring and autumn.

The storage cycle: Most natural gas is produced domestically and shipped to customers through transmission pipelines. Production in the United States and Canada is usually enough to meet demand during spring, summer and fall, but may not be enough during colder winter months. Distribution companies store natural gas during off-peak periods (spring, summer, and fall) and draw from that reserve during times of high demand (winter). The amount of natural gas in reserves is published weekly, and prices may jump or fall if the actual amount is different than expectations.

Energy Pricing

Demand for natural gas generally rises during summer (peak electricity generation season for cooling) and rises further during winter (peak heating season). When demand drops in spring and autumn (off-peak season), natural gas is often injected into stored reserves to be used during times of high demand.