We test the efficiency of the U.S. Natural Gas futures market against both observed and forecasted weather information from across the U.S., and show that the NG futures market incorporates complex meteorological information. We show that U.S. Natural Gas futures are affected by forecasted temperatures, but not by observed temperatures, except for one specific case.We then elaborate the expectation that the risk linked to the uncertainty intrinsic to weather forecasts will be rewarded by market forces. We identify a novel and material “extreme weather forecast” risk premium which outperforms the S&P500 on both an absolute and a risk adjusted basis. Our results, which have never previously been described in literature, are consistent throughout the thirty-year period from the U.S. Natural Gas market deregulation of 1990 up to 2019.

This edition examines the production and use of natural gas, natural gas imports and exports, storage, and other pertinent topics.