Natural Gas Prices Are a Rollercoaster. The Latest Direction Is Down.

Natural gas prices have been volatile, rising and falling largely on weather forecasts. (Dan Kitwood/Getty Images)

Key Points

• Natural gas prices decreased by 7% on Tuesday and Monday, following a peak of $5.29 on Friday, the highest since late 2022.
• Despite recent drops, natural gas prices have increased by 26% since the beginning of the year, driven by demand and exports.
• Warmer weather forecasts are contributing to a decline in natural gas prices, impacting both consumers and producers.

Natural gas prices have been on a wild ride lately, rising and falling based largely on weather forecasts. Last week they hit their highest level since 2022. Since then, they’ve done a U-turn.

On Tuesday, they were down 7% to $4.57 per million British Thermal Units, after falling 7% on Monday. Prices are still up 26% since the start of the year.

The fallout from all this volatility could hit stocks and consumer bills in the weeks ahead.

Natural gas prices rose to $5.29 on Friday, the highest level since late 2022. Natural gas is used for both heating and electricity-generation. When the weather gets cold, people use more of it, and prices tend to rise.

The other factor lifting prices this year is rising demand. The U.S. is exporting a record amount of liquefied natural gas to Europe and Asia. Countries overseas will pay more than U.S. consumers.

Forecasts in several parts of the world had been calling for particularly chilly weather this month. But those forecasts can change fast. More recently, some forecasters have been projecting that temperatures will rise toward the end of the month. “Warming weather has opened the door to chances for far more bearish weather patterns,” wrote analysts at EBW Analytics Group, a research firm, on Tuesday.

While most consumers keep their eyes on the price of gasoline to check up on inflation, natural gas is becoming just as important of a commodity. Not only is it used heavily for home-heating, it’s the number one source of U.S. electricity generation. Rising prices can cause a backlash.

While natural gas producers such as EQT and Expand Energy benefit from high prices, they face risks, too, when prices spike. Some power plants have been switching to coal for generation this year as natural gas prices have risen, according to Bank of America strategist Francisco Blanch. And consumers tired of paying high prices for natural gas heat may consider other options, like electricity-powered heat pumps.

Write to Avi Salzman at avi.salzman@barrons.com