Natural Gas above $7, Hitting Four-Year High
Gas reserves are shrinking as demand spikes in the United States and around the world during the current cold front.
Quick overview
- U.S. natural gas futures have risen above $7/MMBtu for the first time since 2022 due to an ice storm increasing heating demand.
- Extreme cold weather has caused LNG prices to surge by 40% in less than a day, leading to historic market highs.
- The ice storm has blocked about 10% of normal gas production, threatening supply lines and export plans.
- Gas prices in Europe have also increased, with reserves at 46% of peak capacity, indicating a broader supply shortage.
For the first time since 2022, U.S. natural gas futures rose above $7/MMBtu as an ice storm sweeps parts of the country and drives up demand for heating.
Extreme cold weather pushed LNG prices up 40% in less than a day, creating historic highs in the market not seen in years. Now, gas supply is threatened by transport problems as heavy snow and ice storms block roads and limit supply lines.
Gas supply hit another snag this week as the ice storm blocked about 10% of normal production. That figure comes from DNB Carnegie and demonstrates the threat to the industry that this storm poses even with higher than normal prices.
Export Plans Dip as Demand Skyrockets
It has been years since the demand for natural gas to be exported from the United States has been so high, and yet export plants were not able to meet their delivery schedules as planned over the weekend. Major disruptions occurred throughout the United States, affecting gas supplies shipped to trade partners as export facilities faced extensive transportation delays.
Demand in Asia and Europe, regular trade partners for U.S. gas exports, was on the rise over the last week as temperatures dropped. More gas customers are having to stay indoors and stay home from work due to increasing snow and colder temperatures, but limited gas exports could lead to a supply problem.
Gas prices rose in Europe as well, with natural gas futures up to 43 euros per megawatt-hour- about 5.15% higher than previously. European gas suppliers are also dealing with a supply shortage issue, with reserves at about 46% under peak capacity. That brings the supply below the average over the last five years.
Supply levels for U.S. gas companies are still high, as they have been for the past 12 months, but those reserves are dwindling at an incredible rate right now. Still, they are about 5% higher than they were at the same time last year, and according to the EIA’s latest storage report, supplies are around 6% higher than the five-year average.
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