Demand for natural gas soars, prices hold steady
Asnowstorm in Florida, a frozen Niagara Falls and single-digit temperatures throughout Oklahoma and much of the country have not been enough to budge long- and medium-term natural gas prices.
The arctic cold has led to a surge in demand for heating fuels, pushing natural gas usage to a record high of 143 billion cubic feet on Monday. Still, February delivery prices stubbornly held near previous levels, actually falling 13 cents, or 4.3 percent, Thursday to less than $2.88 per thousand cubic feet.
Shorter-term prices, however, have jumped.
Louisiana's Henry Hub spot market prices more than doubled early this week, surging to almost $6.63 per thousand cubic feet. Pennsylvania spot prices jumped to about $5.35.
The previous natural gas usage record was set four years ago at 142 billion cubic feet. At that time, front month futures nearly doubled.
The biggest difference is that U.S. natural gas production has ballooned over the past four years, allowing producers to keep up with even the strongest demand spikes.
The Marcellus in the Pennsylvania area and Ohio's Utica are home to some of the lowest natural gas production costs in the country. New and expanded pipelines in the region have allowed production to grow, although the area still is heavily limited by pipeline capacity.
Natural gas production also has surged in Oklahoma and Texas. Most of the natural gas in the region is associated gas produced along with oil, but growing demand for natural gas in use for power generation, chemicals production and liquefied natural gas exports have helped provide a market for the Okie and Texas natural gas.
While growing general demand has helped create a market for natural gas and provide a floor for natural gas prices, the increased production also has created a price ceiling, effectively limiting-how much futures prices can rise.
Oil numbers are up
While natural gas prices have hovered in a relatively narrow price range for most of the year, oil prices have gained ground in recent months.
Domestic benchmark West Texas Intermediate crude averaged $51 a barrel in 2017, up $7 a barrel from the 2016 average, the U.S. Energy Information Administration said this week. The price at the end of 2017 was $6 a barrel higher than at the end of 2016.
International benchmark Brent crude-saw an even stronger gain in 2017. Brent prices were up $10 a barrel in 2017 and ended the year at $65 a barrel. The spread between the international and U.S. prices-increased to $5 a barrel at the end of the year, the biggest spread since 2013.
The price spread was fueled largely by continued increases in U.S. oil production while the global production decreased, weighed down by an agreement by the Organization of Petroleum Exporting Countries and Russia to hold back production.
U.S. oil production expanded by more than 384,000 barrels per day in 2016 to 9.2 million barrels per day, according to the EIA report.
Increased U.S. production was offset by growing exports. U.S. oil exports averaged about 1 million barrels a day through October 2017 and is on pace to finish2017 up 445,000 barrels a day from the 2016 average.
Still, the country imported about 8 million barrels a day in 2017, up more than 103,000 barrels per day from the 2016 average.