Consumers should expect significant increases in heating bills this coming winter, warns Bob Weir, Director of Research for eResearch.com. Writing in his firms latest Clarionnewsletter, he says natural gas prices should rebound to double digits while crude oil will trade between $100-$120/bbl over the next six months.
The reason? In August, the ratio of the price of crude oil to natural gas climbed to 14,as gas prices fell by more than oil prices. A ratio of 10 isthe norm, according to Weir. Ergo, the price of gas should be going up given oil has stabilized above $100.
Gas prices have indeed collapsedmore dramatically.At the end of June, they hit a high of $13.10/mmbtu while crude oil peaked at $147.10/bbl in mid-July. As September begins, natural gas is priced at$8.24 and oil at $115.46.
In addition, natural gas prices have seasonal fluctuations due to links with air-conditioning and heating cycles. Historically, they begin rising in July and continue upward through to November, notes Weir in eResearch.com’s Clarionnewsletter.