Natural Gas has just dropped from its five-year high in New York--and the extreme U.S. winter may be to blame. The coldest winter in two decades boosted heating demand to all-time highs, which quickly reduced stockpiles, according to Reuters.
In fact, the stockpiles of gas have dropped by alarming rates. Gas fell by 1.4 percent after the U.S. Energy Information Administration admitted that stockpiles had dropped 250 billion cubic feet on Valentine's Day week, according to Business Week. In fact, analyst estimates showed a decline of 257 billion.
"The market is viewing the report as a modest miss to the downside," said Dominick Chirichella, analyst for the Energy Management Institute in New York, in an interview with The Wall Street Journal.
In fact, the reduced stockpiles prompted sweeping highs and lows that the market hasn't seen since shale drilling began flooding the U.S. with gas in 2009, according to Reuters. And it's likely that it's not over, either. According to weather.com, temperatures are expected to slide back toward the teens this coming week, which means that gas demand will rise again.
"Weather forecasts will cause price volatility through March but we expect end-March storage to come in at 1.1 trillion cubic feet, the lowest since 2004," said Adam Longson, a New York-based analyst for Morgan Stanley, in an e-mailed report to Business Week.
Currently, it looks like things depend on the weather. But as temperatures plunge, stockpiles continue to plummet-which makes the market a far more volatile place.
