Gold & Commodities · Intermediate · 4 min

Seasonality

You can explain why many commodities follow seasonal patterns in demand and supply, and why a known season is usually already priced in.

A market with a calendar

Winter arrives every year. So do the summer driving season and the harvest. Few markets are as tied to the calendar as commodities.

It sounds like an easy edge: buy before the season, sell during it. In practice, everyone knows the calendar, and prices already reflect it. This lesson explains the main seasonal rhythms, and what really moves prices within them.

Store in summer, use in winter

Seasonality means patterns in supply or demand that repeat at the same time each year. Three examples:

Natural gas. The EIA explains that US natural gas use peaks in winter, when heating demand rises, with a second, smaller peak in summer from power plants running air conditioning. Production stays fairly steady through the year, so storage balances the difference.
Gasoline. Demand usually rises in the summer driving season.
Grains and softs. Supply depends on planting and harvest cycles, and the weather during the growing season decides how large the harvest will be.

For US natural gas, the EIA describes the storage year in two halves: most injections happen between April and October, most withdrawals from November through March.

The futures curve reflects these rhythms. Contracts for winter delivery usually trade higher than summer contracts, because the market knows demand will be higher. That is why a known season is rarely an opportunity on its own. What moves prices is the surprise within the season: a colder or milder winter than expected, a heat wave, a drought during the growing season, or a storm that hits production.

Seasonal patterns are also useful context for reading data. A fall in gas storage in January is normal. A fall in June would be unusual and would say much more.

Mild winter, lower prices

In a fictional autumn, winter gas futures trade well above summer prices. The market expects a normal winter.

December and January turn out much milder than usual.
Heating demand is lower than expected, and storage falls less than the seasonal average.
Winter gas futures fall 20%, during the very season when demand is highest.

An investor who bought gas because winter was coming had the season right and the weather wrong. The weather was the news. The season was already in the price.

Common mistakes

Trading the calendar. Known seasons are usually priced in.
Ignoring the weather forecast. It is often the real driver within a season.
Reading seasonal data without context. Compare it with the usual pattern for that time of year.
Assuming patterns repeat exactly. Seasons vary from year to year.

The takeaway

Heating seasons, driving seasons and harvests create yearly rhythms in commodities. Markets know them, so prices usually reflect them in advance.

Check yourself

Quick quiz

4 questions. Instant feedback, nothing is saved.

1Tap the season when US natural gas storage is usually drawn down.

Tap the chart.

The EIA explains that most withdrawals happen from November through March, when heating demand peaks.
2Why does natural gas need storage at all?

The EIA notes that storage balances seasonal swings between steady production and seasonal demand.
3Everyone knows winter raises gas demand. Does that mean gas prices always rise in autumn?

Winter contracts already trade at prices that reflect expected demand. Weather surprises move prices, not the calendar.
4Which commodity group depends most on harvest seasons?

Grains and soft commodities follow planting and harvest cycles, which set supply for the year.

of 4 correct.