The benchmark U.S. natural gas price surged by more than 10 percent early on Wednesday as frigid weather and below-freezing temperatures in many parts of the United States stoked demand for heating and electricity.
As of 10:14 a.m. EST on Wednesday, the Henry Hub price was surging by 12.12% at $5.327 per million British thermal units (MMBtu).
Natural gas prices are surging as demand is expected to be high and very high through the weekend due to a winter storm with below-freezing temperatures that is spreading out of the Midwest south to north Texas.
Freezing temperatures and snow and sleet are expected to hit north Texas this week and put to the test the electric grid following last year's deadly deep freeze that left millions of Texans without electricity for days and led to the largest ever decline in oil production as wells froze.
Ahead of this week's expected winter storm, some analysts are concerned that natural gas production in parts of the Permian could be affected by the freeze and leave power plants with lower gas availability.
Electric Reliability Council of Texas (ERCOT) has assured the public that it was "taking early preventative action ahead of the expected increase in demand to ensure the grid remains reliable" and that 321 of 324 electric generation units and transmission facilities "fully passed inspection for new winterization regulations."
Texas Governor Greg Abbott said on Tuesday that the state was better prepared for winter storm weather this year. Yet, he didn't rule out that local power outages could occur because of ice on power lines or trees falling on lines.
According to NatGasWeather.com, U.S. natural gas demand will increase from February 2 through "the next several days as an Arctic blast spreads south and east out of the Midwest with frigid lows of -20s to 20s, including lows of 0s to 30s into Texas and the South, along with snow and ice." Forecasts are for high and very high natural gas demand later on Wednesday through the weekend.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More