Natural Gas Prices and the Extreme Winters of 2011/12 and 2013/14: Causes, Indicators, and Interactions

Day-to-day volatility in natural gas markets is driven largely by variations in heating demand, which are in turn driven by cool season temperatures over the northeastern quadrant of the United States (“Midwest-East”). This study examines the temperature and price fluctuations in recent years and explores some of the climate modes that energy meteorologists use for long-range forecasting. The warmth in 2011/12 was consistent with a positive Arctic Oscillation (AO). The associated enhanced zonal flow reduced the opportunities for intrusions of arctic air masses into the United States. March 2012 was a fitting exclamation point on the winter as it featured the largest warm anomaly for the United States above the 20th century climatology of any month since 1895. The resulting lack of heating demand spurred natural gas prices downward to an 11-year low in April 2012. In sharp contrast, an anomalous Alaskan ridge in 2013/14 led to the transport of cold air from Siberia into the United States, despite the AO generally being positive. The resulting demand exhausted surpluses of natural gas inventory and prices rose to their highest levels since the beginning of the global recession 6 years earlier. This study demonstrates how energy meteorologists use weather and climate data to anticipate these extremes and improve the overall market efficiency.