U.S. natural gas prices surged by 6 percent early on Wednesday as frigid weather in many parts of the United States lifted demand, and commodity markets eyed the Russia-Ukraine crisis, fearing disruptions of natural gas flows to Europe in the event of a conflict.
At 9:57 a.m. EST on Wednesday, the U.S. benchmark price, Henry Hub, was rising by 5.90% to $4.298 per million British thermal units (MMBtu).
Natural gas prices reflected expected high to very high demand for space heating and electricity in the United States in the coming days. According to estimates from NatGasWeather.com for the week January 26 to February 2, national natural gas demand is expected to be strong through the weekend as a series of frigid blasts sweep across the Midwest, Plains, and East with snow showers and frosty lows of -20s to 20s. Lows between teens and the 30s in Texas and the South, along with rain and snow showers, will also lift demand for natural gas. The colder Mountain West will see highs in 10s to 40s with lows of -0s to 30s. Overall, NatGasWeather predicts high to very high national demand through the weekend.
Moreover, higher American LNG exports with more cargoes going to energy-starved Europe is also tightening domestic U.S. supply, which has been relatively flat recently.
Natural gas production in the United States has not seen a major ramp-up, Nick Hillman, Associate - Market Analytics at AEGIS Hedging Solutions, told Natural Gas Intelligence earlier this month.
“It’s another reason this market is tighter than people are giving it credit for,” Hillman added.
U.S. natural gas prices cannot be completely decoupled from the European gas prices, which surged again on Tuesday, as the market fears disruptions in the case of a Russian invasion of Ukraine. A conflict could double Europe’s benchmark natural gas prices and send them exceeding the all-time high set in December 2021, Goldman Sachs said earlier this week.
By Tsvetana Paraskova for Oilprice.com
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Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London