Natural gas prices have slumped to 10-year lows as warm weather cuts heating demand, hammering the profits of drillers and forcing firms like Chesapeake Energy and ConocoPhillips to reduce production.
"We are going through peak heating season and temperatures have been well above normal for most of the nation with weather maps going into early February painting a similar picture," said Chris Jarvis, president of Caprock Risk Management in Rye, N. H.
Energy prices offer the clearest signal that the weather isn't behaving normally, as traders scour forecast screens for a hint of how much heat households and businesses will need in the coming days and weeks.
The answer this winter: not much. November, December and January have come and gone without much sustained cold in the major energy demand centers such as the Northeast, swelling gas inventories to more than 20 percent above last year. Even oil demand has been hit slightly.
Heating degree days, a measurement that reflects the strength of energy demand for home heating, are running 12 percent below winter norms and analysts say gas storage levels will remain high unless there is an extreme and prolonged spell into early spring.
To return storage levels to normal by the end of winter, every single day between mid-February and mid-April would need to be 10 degrees colder than normal, according to Jan Schulte, in-house analyst at Thomson Reuters Natural Gas Analytics.
"That is simply impossible," Schulte said.
Above-normal temperatures are forecast for the first half of February, though private forecaster Weather Services International sees colder than normal temperatures across most of the northern and western United States for some weeks after that.