U.S. natural gas prices on Monday extended their remarkable 70% rally from last week as the big freeze pushes heating and power demand to winter records.
Early on Monday, the front-month U.S. natural gas benchmark price had jumped by 14% to above the threshold of $6 per million British thermal units (MMBtu) as gas demand surged to very high levels. This was the first time since 2022 that the price of U.S. natural gas has soared above $6 per MMBtu, and nearly double the price at the start of last week.
The major storm also led to shut-ins of about 10% of U.S. natural gas production amid curtailments and freeze-offs in major gas-producing states, including Texas, according to data by BNEF.
Forecasts for this week suggest wind chills as low as -50 degrees Fahrenheit (-45.56 degrees Celsius) across the eastern two-thirds of the United States.
With supply reduced and demand skyrocketing, U.S. natural gas prices have staged their strong rally in the past week since the 1990s.
Gas demand is very high, and PJM Interconnection, the biggest grid operator in the U.S. serving most Atlantic and Midwest regions, has committed to buy electricity from gas-fired power plants until the end of the month in a rare move aimed at securing an uninterrupted supply during a cold blast.
PJM will procure electricity until January 31 and not, as is the normal practice, on a daily basis, Bloomberg reports, citing employees of the grid operator.
The winter freeze in the U.S. could be felt across global gas markets as pipeline deliveries to LNG export plants on the Gulf Coast slumped to a one-year low amid curtailments ahead of the storm.
“Whether this disruption spills over into higher prices in Europe and Asia will depend on the extent of any lasting freeze-related damage” analysts at Saxo Bank said in a Monday note.
By Tom Kool for Oilprice.com
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