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AGA Predicting Colder Winter, 3% Increase in Residential NatGas Demand

Residential customers should expect an average 5% increase on their natural gas bills this winter as colder weather leads to higher demand and prices, the American Gas Association (AGA) said Tuesday.

The AGA’s annual Winter Outlook mirrors other trade groups and analysts in calling for a colder 2017-2018 heating season following unusually warm winters the past two years. The AGA said it expects residential customers to use around 3% more gas this year amid a return to more “normal” winter temperatures.

"Americans may use slightly more natural gas this winter to heat their homes, but due to the excellent energy value provided by natural gas, people are not likely to see a very different bill than what they have seen over the past seven years," said AGA Vice President Chris McGill, who focuses on energy analysis and standards for the group. "We are entering the third winter heating season following the extreme cold of 2013-2014, which included the polar vortex. We expect to see temperatures this winter that are more near normal -- not as cold as three winters ago, but not as warm as last year."

AGA said its winter outlook comes from a survey of 42 local distribution companies operating throughout the country.

"The price of natural gas this winter for residential customers has largely been influenced by stable and now growing production, a flexible underground storage position and the presence of strong pipeline exports to Mexico, as well as growth in" liquefied natural gas (LNG) exports, McGill said. "Utilities work all year to prepare for the possibility of extreme temperatures and employ a portfolio approach to help ensure they can meet the needs of their customers at affordable prices on the coldest days of the year."

Earlier this month, the Natural Gas Supply Association (NGSA) also predicted a colder winter in 2017-2018, calling for record-high natural gas demand reaching 92.3 Bcf/d on increasing LNG and Mexican exports. However, NGSA expects ample supply to avoid upward pressure on natural gas prices.

Analysts at Barclays Capital recently issued an updated price forecast predicting that demand this winter could exceed the gas market's expectations.

"We believe that the markets are currently not fully pricing in the probability of a colder than normal winter," analyst Nicholas Potter said. "Higher inventory builds following Irma and Harvey, increasing production levels and two mild winters in a row may explain the conservativeness of the current winter curve."

Also this month, AccuWeather predicted a chilly winter in the Northeast and Mid-Atlantic, with above-normal snowfall versus a year ago. With a weak La Nina predicted to develop this winter, the Northwest and the Rockies also are set to receive an abundance of precipitation.

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