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Oil Prices Fall Back Despite Bullish Predictions

Oil Prices Fall Back Despite Bullish Predictions

Bullish predictions from major investment…

Texas Freeze Led To Biggest Monthly Drop In U.S. Natural Gas Output   

The winter storms in February triggered the largest monthly drop in U.S. natural gas production on record, primarily due to freeze-offs in Texas, the Energy Information Administration (EIA) said on Monday.

During the cold snap in February, production across the United States, especially Texas, was disrupted, while natural gas consumption in the residential sector hit a record high, EIA data showed.

U.S. natural gas production in February 2021—measured by gross withdrawals—averaged 104.8 billion cubic feet per day (Bcf/d). This was 8.1 Bcf/d, or a 7-percent decline, compared to January, and was the largest monthly decline on record.

In Texas, natural gas production dropped by a record 15 percent, or by 4.3 Bcf/d, to 21.5 Bcf/d, and the decline in the Texas production accounted for most of the overall slump in American natural gas output, the EIA said.

During the coldest week in Texas, natural gas production collapsed by 45 percent, primarily due to freeze-offs, as the infrastructure in Texas is more susceptible to extreme cold snaps, unlike the relatively winterized natural gas production infrastructure in the northern parts of the United States.

The winter storms resulted in the second-largest weekly withdrawal of natural gas from storage in the U.S. as demand spiked, while net natural gas withdrawals from storage this heating season exceeded the five-year average by 10.6 percent because of the inclement weather, EIA data showed earlier this year.

The large withdrawals were due to both decreased production, but also record-high consumption in the residential sector in Texas and a three-year high consumption in the commercial sector. In February, residential sector consumption in Texas hit a monthly record high of 1.8 Bcf/d, up by 53 percent compared to February 2020 and 64 percent higher than the five-year average, as per EIA data.

A recent analysis by The Wall Street Journal has found that the Electric Reliability Council of Texas (ERCOT) tried to prevent blackouts during the winter storm by paying large industrial users to cut power consumption, but the program to save electricity actually ended up further eroding natural gas supply because some of those large users they shut down were natural gas infrastructure firms.

By Tsvetana Paraskova for Oilprice.com

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