By Alex Mills
Alex Mills
Very cold temperatures in heavily populated areas of the U.S. created a demand for natural gas that is near record breaking and sent prices above $5 for the first time in years.
USA Today reported in its Jan. 29 edition that January has had seven of the top 10 days for natural gas demand. Moreover, five of the highest demand days occurred in January 2014. Two other high demand days came in January 2009 and one in February 2011.
The Energy Information Administration reported on Jan. 23 that total natural gas consumption for the report week rose 18.9% above last week’s levels, as temperatures fell once again. Consumption in the residential/commercial sectors drove the increase, rising 27.8%, largely because of the sharp temperature drop. The industrial sector, which also uses some amount of natural gas for heating, consumed 3.9% more gas week-on-week.
Electric sector consumption rose by 18.9%, driven largely by the Southeast and the Midwest, according to EIA. The largest volumetric increase in electric sector gas consumption was in the Southeast, where power burn increased from about 6 billion cubic feet per day (Bcf/d) over the weekend, to nearly 9.3 Bcf/d on Jan. 22, increasing 29.3% over the report week. The Midwest saw the largest percentage increase because of extremely cold weather late in the report week, rising 83.5% week-on-week. Midwest consumption increased from around 0.6 Bcf/d over the weekend to around 2.4 Bcf/d Tuesday and yesterday.
Prices rose across the country, with record increases in the Northeast. Natural gas on the New York Mercantile Exchange closed at $5.557 for February delivery on Jan. 29, which was an increase of $0.524 from Jan. 28. The NYMEX Henery Hub Futures price had a three month average of $5.19. Last year, prices averaged $3.73.
The extremely cold weather caused substantial price increases in populous, pipeline-constrained parts of the Northeast such as New York City and Boston. Transco Zone 6 serving New York City saw record price increases, beginning the report week at $4.92/MMBtu on Jan. 15, more than tripling to $16.95 on Jan. 17, then reaching a record $121.68/MMBtu on Jan. 21, according to EIA. The price fell somewhat on Jan. 22, closing at $84.02/MMBtu. Transco Zone 5 and Transco Zone 6 non-NY saw similar price movements. Algonquin Citygate, serving Boston, also featured extreme price jumps late in the report week. It began the week at $6.63/MMBtu, tripling to $20.90/MMBtu on Jan. 21, reaching $58.39 on Jan. 22, and closing at $78.30/MMBtu on Jan. 23.
Alex Mills is President of the Texas Alliance of Energy Producers. The opinions expressed are solely of the author.
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