Natural gas storage level forecasting using temperature data

Sammanfattning: Even though the theory of storage is historically a popular view to explain commodity futures prices, many authors focus on the oil price link. Past studies have shown an increased futures price volatility on Mondays and days when natural gas storage levels are released, which could both implicate that storage levels and temperature data are incorporated in the prices. In this thesis, the U.S. natural gas storage level change is studied as a function of the consumption and production. Consumption and production are furthered segmented and separately forecasted by modelling inverse problems that are solved by least squares regression using temperature data and timeseries analysis. The results indicate that each consumer consumption segment is highly dependent of the temperature with R2-values of above 90%. However, modelling each segment completely by time-series analysis proved to be more efficient due to lack of flexibility in the polynomials, lack of used weather stations and seasonal patterns in addition to the temperatures. Although the forecasting models could not beat analysts’ consensus estimates, these present natural gas storage level drivers and can thus be used to incorporate temperature forecasts when estimating futures prices.