In rare move, U.S. taps reserves

Natural gas is having a record summer. Oil and gas producers are pulling more out of U.S. wells than they have in decades. And now, for the first time in a while, U.S. power plants are using even more than is produced.

During one week last month, the country used up a little of its gas reserves for the first time during a summer in 10 years, according to a report released Monday by the U.S. Department of Energy.

“This is one data point — certainly going in the right direction,” Morningstar analyst Mark Hanson said. “Still, there’s so much gas.”

The nation has been awash in natural gas for years now. The shale boom produced more than the U.S. could use, building stockpiles and driving down prices.

Spot prices fell from as high as $13 per million British thermal units in 2008, to $1.63 in 2015, and kept falling. In March this year, they dropped below $1.50 per million BTU.

It became cheaper for power plants to burn gas than coal. In April last year, natural gas generated more electricity than coal in the U.S. for the first time

in decades.

On Monday, the energy department’s Energy Information Administration reported that record consumption of natural gas for the week ended July 29 — driven largely by electric power generation — required the use of 6 billion cubic feet of natural gas storage inventories. It was the first nationwide natural gas withdrawal in any summer since 2006.

Blame it on the heat, Hanson said, and the heavy use of air conditioners. Natural gas consumption is typically seasonal, with the U.S. typically using more than it generates in winter, when heaters are cranking.

“To actually withdraw gas in the summertime is very rare,” Hanson said.

Texas even set a record on Monday. Just after 4 p.m., the electric grid consumed more power — more than 70,000 megawatts — than at any other time in the state.

Meanwhile, natural gas prices have slowly begun to rebound. Futures closed just under $2.75 on Monday.

And more consumption will eventually lead to even higher prices, Hanson said.

Still, he said, don’t think any of this makes for a trend.

Total natural gas inventories stand at 3.3 trillion cubic feet, 16 percent higher than recent five-year averages, the energy department said.

“These things tend to work themselves out,” Hanson said. “But there’s still a long way to go here before saying the oversupply problem is solved.”