The bulk of the decline in the price of US natural gas, from $6 per million British thermal units (MMBtu) early in 2010 to around $3 at the start of 2012, can be explained by the surge in supply. But the further fall in the last few weeks, taking prices below $2, is largely due to the exceptionally mild weather in North America, which has cut demand. More normal seasonal temperatures could therefore be sufficient to return the price of US natural gas to around $3 over the summer. Thereafter, we expect more fundamental shifts in both supply and demand to lift prices to $4 by the end of 2012.
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