Is This Year’s January Thaw a Long-Term Buying Opportunity?

Energy News Update: January 22, 2024 Is This Year’s January Thaw a Long-Term Buying Opportunity? In our January 8th Energy

Energy News Update: January 22, 2024

Is This Year’s January Thaw a Long-Term Buying Opportunity?

In our January 8th Energy Update we pointed out that since 2000, Natural Gas declined 4 times to where it was in 2023, and the average price was always higher long-term. and although periodically there will be short-term pullbacks, we believe the average price of Natural Gas will be higher from 2024 through 2026. 

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We also pointed out that similar to 2020 and 2021, Natural Gas rallied into the Fall prior to declining in response to warmer-than-normal weather in November and December and Natural Gas then rallied into 2024 in anticipation of colder weather in January:

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January 15 - 19, 2024

After the cold weather arrived in January, it was culminated with a polar vortex with many areas experiencing subzero temperatures:

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January 25 - 31, 2024

But the cold wave was unexpectedly followed by a January Thaw with temperatures far above normal expected until the end of January:

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And as one would expect after declining in November and December, Natural Gas’s rally into 2024 was short circuited by the unexpected January Thaw:

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But it is important to look at this latest decline from a long-term perspective.

From a longer-term perspective we know that since 2000, when Natural Gas was as low as it was in 2023, the average price was always higher long-term; therefore, history tells us we are likely in the early stage of a Bull Market cycle.

And we also know during the winter heating season, Natural Gas prices are very sensitive to weather changes, and when you are in the early stage of a  Bull Market cycle it is always wise to take advantage of short-term declines caused by unexpected changes in the weather.

Therefore, if you have not already hedged your cost of Natural Gas or Electricity, we recommend you take advantage of this latest short-term decline caused by this year’s January thaw, we believe the average price will be higher long-term, and the upside risk is far greater than the downside reward potential of waiting hoping for slightly lower prices.

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Not every client’s risk tolerance and hedging strategy are the same, but hopefully today’s report will help put into perspective your risk/reward opportunities. We 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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