U.S. Natural Gas Prices Jump After Pennsylvania Pipeline Explosion

Natural gas prices have jumped in the aftermath of an explosion Friday in western Pennsylvania which destroyed one home, damaged at least three others and seriously injured one person.

Following the incident, U.S. natural gas prices reached their highest since January, largely due to the fact that the blast disrupted shipments.

The explosion, which disrupted shipments on the Pennsylvania segment of Spectra Energy Corp.’s Texas Eastern line carrying the fuel from the Gulf Coast to New York, has immediately impacted on the gas prices. The pipeline system was transporting 1.3 billion cubic feet of gas a day before the incident.

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A spokesman for Spectra Energy—the interstate pipeline operator--said the pipeline was one of four parallel lines running through the rural area in western Pennsylvania. One of the other pipelines was out of service, and the remaining two were being drained of natural gas. The spokesman said the sector of the pipeline damaged by the explosion was built in 1981 and a 2012 inspection resulted in no need for repair or remediation.

The coldest weather since mid-April has also played a role in boosting gas consumption amid curtailed supplies. Gas futures capped a second straight monthly gain on speculation that low prices will reduce output from shale formations as weather-related demand chips away at the biggest seasonal stockpile glut we’ve seen in four years.

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“It seems like this is a slightly delayed price reaction to the news of the pipeline explosion,” Kyle Cooper, director of research at IAF Advisors in Houston, told Bloomberg. “We have some below-normal temperatures in the Northeast, which is compounding concerns about supply constraints.”

Natural gas for June delivery rose 10 cents, or 4.8 percent, to $2.178 per million BTU on the New York Mercantile Exchange, the highest settlement since Jan. 29. Gas climbed 11 percent this month.

Officials from the federal Pipeline and Hazardous Materials Safety Administration are now investigating the cause of the explosion, while the interstate pipeline operating company, Spectra Energy, said it was taking steps to reduce harmful effects on the environment.

By Charles Kennedy of Oilprice.com

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