Warm winter weather leads to chaos in energy trading as demand craters for heating
Record February warmth could force fossil fuel producers to cut production or out of the market completely which would mean a shortage next winter.
Air conditioning in February leads to chaos in energy trading
Winter Warming Warnings: Air condition demand in February! It's happening in places like Texas and gave a boost to Natural Gas but slowed the demand for heating oil because of unbelievably warm weather. FOX Business Contributor Phil Flynn joins FOX Weather to explain.
The recent February heat wave across the central U.S. allowed millions to turn off the heat, but the winter savings on the heating bill could end up costing us more down the road.
"I don't know what you guys are doing with the weather over there, but it's been causing havoc throughout the futures market and the natural gas market," FOX Business Contributor and author of The Energy Report, Phil Flynn, told FOX Weather.
More than 230 cities hit record highs on Monday alone. A handful set all-time record highs for the entire month of February. Folks in Abilene, Texas, even needed air conditioning as the mercury soared to 94 degrees. That record held for more than 100 years. Killeen, Texas hit 100.
SOARING TEMPERATURES COULD SHATTER OVER 300 RECORDS TO CLOSE OUT FEBRUARY
Several cities broke their all-time February record highs on Monday.
(FOX Weather)
Record heat today could lead to higher heating prices tomorrow
"Unbelievable, we have this record warm winter where normally we're burning natural gas to keep our house warm, and because that isn't happening, we're building this historic glut of supplies," Flynn explained. "And producers are in so much trouble right now that many may have to go bankrupt. We're going to have to see a lot of them cut back production."
NOAA FINDS ‘SMALL BUT NOTICEABLE SHIFT’ IN COLDEST TIME OF YEAR FOR EASTERN U.S.
When demand drops, so does the price, and fuel producers aren't making money.
In New England, the U.S. Energy Information Administration reports the daily spot price of natural gas at Algonquin Citygate was down to $1.48 per million BTUs on Wednesday, which is just over half what it was earlier this month and a far cry from the spike in prices to between $13-14 per million BTUs about a year ago during a cold snap. The benchmark Henry Hub natural gas price fell to its lowest price since 1997 when adjusted for inflation, the EIA reported.
The historically low prices over the winter could force some producers out of the market, meaning there will be fewer products in the marketplace in the future.
MONEY SAVING TIPS FOR HOME HEATING BILLS
(FILE) In this file photo taken on March 11, 2019 a refinery near the Corpus Christi Ship Channel is pictured in Corpus Christi, Texas.
(OREN ELLIOTT/AFP via Getty Images / Getty Images)
"So whenever you get these extreme type of situations and prices get too low where people can't make money, you get a situation that creates a longer-term bottom and (low) prices that, down the road, a few years out, we will be paying much higher prices," Flynn said.
The eastern half of the nation looks to remain above average, temperature-wise, into early March keeping heating fuel consumption low.
The long-range temperature outlook from NOAA's Climate Prediction Center.
(FOX Weather)