BRINGING THE HEAT

Natural gas consumption breaks record

Plunging temperatures over the past few weeks have led Americans throughout the country to crank up the thermostat and burn billions of cubic feet of natural gas.

As a result, natural gas has been pumped from storage and transported throughout the country to meet surging demand.

For the first week of the year, the country shattered the previous record for natural gas consumption, withdrawing 359 billion cubic feet of natural gas from storage to meet surging demand, the U.S. Energy Information Administration said.

The withdrawal smashed the previous weekly record of 288 billion cubic feet set four years ago.

The record natural gas demand sent spot prices for immediate delivery soaring, but had relatively little effect on medium- or longterm prices. Spot prices in Oklahoma and Louisiana surged to $6 or $7 per thousand cubic feet on the coldest days, but those prices jumped to as much as $175 in New York.

“The system worked the way it was designed to work,” said Eric Fell, senior natural gas analyst with Genscape. “There’s limited pipeline capacity and very limited storage in that part of the country, so on a very cold day, the way the market balances is by encouraging people to switch to other fuels. So power plants that have the ability to switch fuels have an incentive to switch.”

Bomb cyclone beats polar vortex

The record withdrawal was fueled by both frigid temperatures and growing demand, Fell said.

“The bomb cyclone

(winter storm) was a bigger event than the polar vortex of four years ago,” Fell said. “We’ve had record residential and commercial heating demand, partly because of record cold, but also because we’ve had significant growth in residential demand per heating day.”

The country’s base natural gas demand has ballooned in recent years as many homes and businesses in the Northeast have converted to natural gas from fuel oil, and as utilities throughout the

country increasingly have turned to natural gas over coal. But the first week of 2018 shattered demand on all systems.

“It was a record cold week by quite a bit,” Fell said.

Residential and commercial sectors burned 452 billion cubic feet of natural gas the week ending Jan. 5, up from 348 billion cubic feet in the previous week, the EIA report said. Total weekly natural gas consumption in the continental United States increased 150 billion cubic feet to 961 billion cubic feet.

While demand was surging, production slowed a bit as some wells and gathering pipelines

froze in the Pennsylvania and Ohio areas.

Genscape estimates that about 20 billion cubic feet of natural gas — about 3 billion cubic feet per day — of production was unable to make it to market because of freeze-overs, Fell said.

The country’s natural gas production was 517 billion cubic feet the week of Jan. 5, down from record levels of 539 billion cubic feet the previous week, the EIA report stated.

Natural gas exports went down, too

The country’s natural gas exports also were affected. About 3 billion

cubic feet of natural gas daily is liquefied and exported from Cheniere Energy’s Sabine Pass on the Louisiana Gulf Coast.

“Sabine Pass ramped down production that day,” Fell said. “That was the first real example of economics driving our LNG exports down from full utilization in the very, very short run. It was just for a couple of days, and it was driven by the cash price.”

Longer term, natural gas front month

futures price slipped 7 cents Tuesday to $3.13 per thousand cubic feet. The price is up 49 cents from $2.64 on Dec. 27, before the cold front moved in.

“We had a record cold shock, but winter will end. We will go back from storage withdrawals to injection in the spring,” Fell said.

Still, there could be a modest lasting effect, he said. The summer injection season lasts about 214 days. Demand in the first week of January

was about 200 billion cubic feet more than normal. On average, that would mean storage companies will need to store an additional roughly 1 billion cubic feet of natural gas per day over the summer to make up for the cold spell, a move Fell said typically would add about 30 cents per thousand cubic feet to the summer price of natural gas.

“The price of natural gas is still largely weather related,” he said.