by Marin Katusa, Casey Research:
The unusually cold winter in New England has lit a fire under the price of natural gas, which was trading between US$3.00 and US$4.00 per million BTU (MMBTU) for much of last year. On February 10, 2014, the spot price rose to as much as US$8.15.
As it turns out, weather has everything to do with natural-gas prices. When the winters are abnormally cold, people crank up the heat—which, in turn, spikes up the demand of natural gas and therefore the price:
Another reason why the spot price of natural gas jumped is that inventories are at five-year lows. It’s the old supply-and-demand issue—as supply has been dwindling due to low prices and uneconomic production, the price has inevitably risen. This helpful chart from the Energy Information Agency (EIA) shows just how low this year’s inventory is compared to previous years:
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