U.S. gas prices climb as stocks fail to rebuild fast enough: Kemp - Reuters News
29-Jul-2022 15:34:16
LONDON, July 29 (Reuters) - U.S. natural gas prices have climbed to their highest seasonal level for 14 years as hot weather and demand from electric generators has coupled with strong exports to Europe to keep inventories below the pre-pandemic average.
In real terms, front-month futures for deliveries at Henry Hub in Louisiana are trading at more than $8 per million British thermal units compared with over $4 at the same point last year and the highest since 2008.
Cumulative cooling demand since the start of the year in the Lower 48 states has been the highest since 2018, according to data from the U.S. Climate Prediction Center.
With many former coal-fired electric generators disconnected from the grid or dismantled, high cooling demand has translated into high levels of gas consumption.
In the western United States, prolonged drought and reduced hydro-electric generation has further elevated gas use.
At the same time, the United States has become the world’s largest liquefied natural gas (LNG) exporter, with volumes increasing by 12% in the first half of 2022 compared with the same period in 2021.
Most of the extra LNG has been shipped to Britain and European Union replacing lower pipeline gas deliveries from Russia ("United States became world's largest exporter in first half of 2022," EIA, July 25).
LNG exports have slowed since early June after a fire halted shipments from Freeport's LNG export terminal on the Gulf of Mexico ("Fire causes shutdown of Freeport LNG terminal", EIA, June 23).
In the absence of the Freeport fire, inventories would likely be even lower and prices would have risen even higher.
Even with the recent slowdown in exports, however, working stocks in underground storage amounted to just 2,416 billion cubic feet (bcf) on July 22 compared with a pre-pandemic five-year seasonal average of 2,802 bcf.
Inventories had risen by only 1,034 bcf since the start of April compared with a pre-pandemic average increase of 1,104 bcf ("Weekly natural gas storage report", EIA, July 28).
The number of rigs drilling for gas has increased to 155 up from just 104 a year ago, according to data from field services company Baker Hughes, but there has been little further increase in natural gas production over the last six weeks.
As a result, US gas inventories are on course to start winter well below average, with Europe and Asia still scrambling for LNG, which will likely keep US natural gas prices elevated.
Why are natural gas prices over $8 in July?
Why are natural gas prices over $8 in July?
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Why are natural gas prices over $8 in July?
Weather forecast for August. Starts off very bullish for natural gas demand.
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From Weather Underground:
August marks the final full month of summer, and this year it looks like there will be a sweltering conclusion for many in the Lower 48, especially east of the Rockies.
Temperatures are forecast to be the most above average in August for a vast area that stretches from the Plains and Midwest into portions of the Northeast, according to the latest update from The Weather Company, an IBM Business, and Atmospheric G2. The forecast has trended hotter for a more expansive area in those regions when compared to the initial outlook issued earlier in the month.
"The combination of a strong La Niña base state, historically-strong persistence and ongoing/building drought across the western/central U.S. suggest a hot August is a slam dunk," said Todd Crawford, director of meteorology at Atmospheric G2. < If the La Nina stays in the Pacific Ocean, it should produce a colder than normal winter in the U.S. east of the Rockies. Two Year La Ninas have produced some of the coldest U.S. winters.
Most other locations, including the coastal Southeast and much of the West Coast, are forecast to see temperatures near or slightly above average. Only a sliver of the Desert Southwest might be slightly cooler than average due to monsoon thunderstorm activity holding temperatures down. < "Cooler than Average" for Arizona is still HOT in August.
A shift in the large-scale weather pattern will help ring in this hot pattern east of the Rockies right as the month begins.
July ended with a dome of high pressure bringing a prolonged heat wave to the Northwest. Meanwhile, parts of the Northern Plains, upper Midwest and Great Lakes have seen temperatures that are relatively tolerable for mid-summer because of a southward plunge of the jet stream
That setup will completely flip in August's first week and allow expansive high pressure to bring heat back to much of the central and eastern states. The Northwest will cool off at the same time as a southward plunge of the jet stream sets up over that region.
----------------------------------
From Weather Underground:
August marks the final full month of summer, and this year it looks like there will be a sweltering conclusion for many in the Lower 48, especially east of the Rockies.
Temperatures are forecast to be the most above average in August for a vast area that stretches from the Plains and Midwest into portions of the Northeast, according to the latest update from The Weather Company, an IBM Business, and Atmospheric G2. The forecast has trended hotter for a more expansive area in those regions when compared to the initial outlook issued earlier in the month.
"The combination of a strong La Niña base state, historically-strong persistence and ongoing/building drought across the western/central U.S. suggest a hot August is a slam dunk," said Todd Crawford, director of meteorology at Atmospheric G2. < If the La Nina stays in the Pacific Ocean, it should produce a colder than normal winter in the U.S. east of the Rockies. Two Year La Ninas have produced some of the coldest U.S. winters.
Most other locations, including the coastal Southeast and much of the West Coast, are forecast to see temperatures near or slightly above average. Only a sliver of the Desert Southwest might be slightly cooler than average due to monsoon thunderstorm activity holding temperatures down. < "Cooler than Average" for Arizona is still HOT in August.
A shift in the large-scale weather pattern will help ring in this hot pattern east of the Rockies right as the month begins.
July ended with a dome of high pressure bringing a prolonged heat wave to the Northwest. Meanwhile, parts of the Northern Plains, upper Midwest and Great Lakes have seen temperatures that are relatively tolerable for mid-summer because of a southward plunge of the jet stream
That setup will completely flip in August's first week and allow expansive high pressure to bring heat back to much of the central and eastern states. The Northwest will cool off at the same time as a southward plunge of the jet stream sets up over that region.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group