Natural Gas Prices and the Extreme Winters of 2011/12 and 2013/14: Causes, Indicators, and Interactions

Abstract Day-to-day volatility in natural gas markets is driven largely by variability in heating demand, which is in turn dominated by cool-season temperature anomalies over the northeastern quadrant of the United States (“Midwest–East”). Energy traders rely on temperature forecasts at horizons of 2–4 weeks to anticipate those fluctuations in demand. Forecasts from dynamical models are widely available, so the markets react quickly to changes in the model predictions. Traders often work with meteorologists who leverage teleconnections from the tropics and the Arctic to improve upon the model forecasts. This study demonstrates how natural gas prices react to Midwest–East temperatures using the anomalous winters of 2011/12 and 2013/14. These examples also illustrate how energy meteorologists use teleconnections from the Arctic and the tropics to forecast heating demand. Winter 2011/12 was exceptionally warm, consistent with the positive Arctic Oscillation (AO). March 2012 was a fitting exclamation point on...