Winter Update, Natural Gas Consolidating Above Support Near Lower Bollinger Band

Natural Gas Winter Update Short and Long-Term Outlook In today’s Energy Alert I will review Natural Gas rates in 2021,

Natural Gas Winter Update

Short and Long-Term Outlook

In today’s Energy Alert I will review Natural Gas rates in 2021, and discuss the outlook for 2022, short-term and long-term.


In 2021, Natural Gas increased 43% rallying from $2.58 to $3.68 per MMBtu as we begin trading in 2022. Natural Gas’s rally initially started in April and moved sharply higher into the fall before milder than normal weather short-circuited the rally. But as we enter a new year, we face the prospect of increased volatility due to rising competition for our Natural Gas supplies from buyers overseas.

Short-Term Outlook

In my Dec 6th Energy Update, I said milder than normal weather forecasted for the first half of December led to prices plunging from their fall high:

After writing my Dec 6th Energy Update, milder than normal weather continued through the end of the month, but Natural Gas didn’t continue its decline, instead it consolidated near the lower Bollinger Band:

When a market doesn’t decline when the news justifies a decline, it is telling you short-term the path of least resistance is likely to the upside. I am not saying Natural Gas must go higher from here, if warmer than normal weather persists this month the consolidation pattern could be resolved to the downside, but if the January thru March weather is colder than normal, Natural Gas prices are poised to move sharply higher short-term.  

Long-Term Outlook

Since the beginning of the year, I warned energy prices were increasing primarily due to the present administration’s restrictive energy policies, aggressive fiscal spending, and quantitative easing by the Fed, and these factors collectively increased the risk of inflation in the U.S.

Also, as we enter this year’s winter heating season, due to their green energy policies, Europe Natural Gas supplies are near a 10-year low, which increases the risk of higher prices not only this winter, but long-term since the polices leading to today’s high prices are not abating, they were becoming more entrenched abroad.

Overseas buyers of our Natural Gas has greatly increased over the last five years when most of the infrastructure required to ship the fuel overseas didn’t exist. But today with the increased capability to export Liquified Natural Gas (LNG), demand for our LNG will increase when prices overseas increase, and we should anticipate increased price volatility will be present relative to recent history.

In my Dec 6th Energy Update, I said early in the 21st century, we experienced higher Natural Gas prices and volatility prior to fracking giving us sufficient supplies to meet our energy needs, but over the last 10 years we were blessed with a period of lower prices and volatility with fracking giving us sufficient supplies to meet our energy needs.

But the long-term risk factors discussed earlier have increased the potential we will return to the prior period of higher prices & volatility before fracking.

I believe we are entering an extended period of high volatility in which the timing of entering hedges is extremely important. When prices decline during periods of lower-than-expected demand it should be used as an opportunity to lock in a fixed rate.

Therefore, if you have not already hedged your cost of Natural Gas or Electricity, I recommend you take advantage of the unexpected short-term decline in Natural Gas as protection against the risk of higher Natural Gas and Electricity prices long-term. Although it is possible rates could go lower short-term, I am confident there will be a time in 2022 when rates will be significantly higher than where they are as I write this report. 

Not every client’s risk tolerance and hedging strategy is the same, but the above report will help you put into perspective the risk/reward opportunities. I invite you to call one of our energy analysts to help you plan a hedging strategy appropriate for your situation.

Ray Franklin
Energy Professionals
Senior Commodity Analyst


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