Climate events matter in the global natural gas market

Abstract

This study examines the impact of 2404 global extreme climate events on natural gas abnormal returns (ARs) and identifies the driving factors of the impact. The findings show that 24.09% of the global extreme climate events have a significant impact on natural gas ARs, with the cumulative abnormal returns (CARs) reaching their peak on the eighth day after the event. There is heterogeneity in the patterns of the impacts of extreme climate events on CARs. Among them, the impacts of storms are strongest, the impacts of extreme temperatures have the longest duration, the responses of CARs to wildfires are the earliest, and the responses to floods with high damage and high-peak CARs have the largest differences in trends. In terms of the regions of extreme climate events, the responses of CARs are most rapid to events in the Americas, are strongest to events in Europe, and are most moderate to events in Asia. Compared with events occurring in non-major gas-producing countries, events occurring in major gas-producing countries have greater influences. We also find that the impact of extreme climate events on the natural gas market is deepening over time. Finally, the study finds that factors concerning fundamental, speculative, climatic, and event attributes have significant impacts on peak CARs.