In the Northeast region, wholesale gas prices have risen despite ample supply.
The price of natural gas is trading at elevated levels as cold weather sweeps across the United States, triggering higher heating demand from consumers.
Natural gas
futures at Henry Hub—a pricing hub for North America—were trading at $3.35/MMBtu as of Jan. 3, up more than 10 percent from $3.04 in early December. Spot
prices have been rising since November, jumping from $1.21 on Nov. 11 to $3.40 on Dec. 31, an increase of more than 180 percent.
A winter storm is predicted for the Jan. 4 to Jan. 6 period, according to the National Weather Service (NWS).
The storm is set to spread “across the Ohio Valley on Sunday where severe travel disruptions are expected. The storm will then track into the Mid-Atlantic Sunday night and into Monday,” NWS wrote in a Jan. 4
post on social media platform X.
In addition, the agency’s
forecast for Jan 12 to Jan. 18 suggests a high probability of states along the east coast experiencing below normal temperatures.
Periods of cold weather trigger an increase in natural gas demand for heating purposes from residential and commercial consumers, putting upward pressure on prices.
“If unexpected and cold or severe weather occurs, the effect on prices can intensify because supply is often unable to react quickly to short-term increases in demand,” the U.S. Energy Information Administration
said. “The effect of weather on natural gas prices may be greater if the natural gas transmission (pipeline) system is already operating at or near full capacity.”
Severe weather disrupts production. Moreover, natural gas stocks have declined on an annual basis. As of Dec. 27, 2024, gas stock stood at 3,413 billion cubic feet, less than the 3,480 billion cubic feet from a year back, agency
data show.
According to a Jan. 3 S&P
report, wholesale natural gas prices in the Northeast region “spiked into triple-digit territory in reaction to the expected cold snap driving up demand for power and gas despite a lack of reliability concerns.”
The Midcontinent Independent System Operator and Southwest Power Pool published advisories highlighting surging loads, the report said, while the Electric Reliability Council of Texas issued a notice warning of a “possible emergency condition.”
Trump Effect
With the second Trump presidency set to begin this month, investors are looking to the new president’s policies regarding the energy industry.An ING Bank
report states that a Trump presidency may “provide more certainty to the industry and provide comfort to them to invest in pipeline infrastructure, alleviating a persistent bottleneck for the US natural gas market, particularly in the Permian region.”
During the first Trump administration, the number of oil and gas leases issued for federal lands increased. This was reversed under Biden.
“While the incoming administration will hold a more favorable view towards the oil and gas industry, ultimately the potential for production growth is going to be largely dictated by price,” ING stated.
Meanwhile, the U.S. natural gas industry faces hurdles from China in the form of LNG exports, the report said.
In 2018, China imposed 10 percent tariffs on LNG from the United States, which it raised to 25 percent in 2019. As a consequence, U.S. LNG exports to Beijing dropped to zero. Exports of liquid petroleum gas (LPG) only started picking up, after a hiatus of 20 months, when tariffs were waived by China in March 2020 following a trade deal with Washington.
The Chinese regime may look to adopt similar measures during the next Trump administration.
However, a tight LNG market and stronger European demand “may provide some comfort to the U.S. if China were to target U.S. LNG,” according to the ING report.
President-elect Donald Trump last month
demanded that the European Union buy enough American oil and gas to make up for the U.S. trade deficit in the region. Failure to do so could result in Washington imposing tariffs, he said.
In an emailed statement to The Epoch Times, EU Commission spokesperson Olof Gill said the bloc was “ready to discuss with President-elect Trump how we can further strengthen an already strong relationship, including by discussing our common interests in the energy sector.”
