U.S. natural gas markets may be moving to a new equilibrium. In the future, natural gas markets could face more seasonality, higher volatility, and greater demand for seasonal storage. This dynamic is largely attributable to the growing role of liquefied natural gas, or LNG, in U.S. markets. With U.S. LNG exports expected to rise in the post-pandemic period, international markets will increasingly influence U.S. natural gas demand and prices.

LNG Seasonal volatility

Natural gas demand is highly seasonal, with demand typically peaking during extreme temperatures (i.e. summer and winter). In most Northern hemisphere demand markets, such as the US Midwest or Europe, demand peaks in the winter, falls in the spring on temperate weather, picks up again amid summer temperatures and cooling demand, and is again lowered by moderate fall weather. This isn’t true for every market, of course: in Northern hemisphere markets closer to the equator, such as Texas or Mexico, summer cooling demand can sometimes exceed heating demand. Nevertheless, the “shoulder season” of spring and fall typically sees lower demand across the U.S., OECD Europe, and OECD Asia.