U.S. natural gas supplies have fallen by the most in over a year as extreme cold froze wells, while heating demand was on track to hit a record on Tuesday and lift both power and gas prices to multi-year highs.
The Arctic blast sent temperatures plummeting across a vast swath of the U.S., leading to power outages in the Pacific Northwest and elsewhere, and snarling everything from political campaigning to football games and travel.
Analysts boosted earlier forecasts for record gas demand on Tuesday but reduced their outlook for gas use on Monday, in part because many businesses and government offices will remain shut for the long U.S. Martin Luther King Jr. Day holiday weekend.
The Electric Reliability Council of Texas (ERCOT), which operates much of the state’s power grid, urged homes and businesses to conserve electricity on Monday and Tuesday mornings before solar power facilities start producing energy, due to tight grid conditions from freezing weather, high demand and unseasonably low amounts of wind power.
While it said the grid “avoided emergency operations due to the conservation efforts by Texas residents and businesses,” ERCOT expected electricity demand on Tuesday morning to top last summer’s all-time high and forecast tight power reserves.
In February 2021, Winter Storm Uri left millions in Texas and other states without power, water and heat for days and resulted in over 200 deaths as ERCOT used rotating outages to prevent a grid collapse after an unusually large amount of generation shut.
U.S. GAS SUPPLY AND DEMAND
U.S. gas production was on track to drop by about 10.6 billion cubic feet per day (bcfd) over the past week to a preliminary 11-month low of 97.1 bcfd on Monday due primarily to freeze-offs, when low temperatures freeze wells and other equipment.
That decline, however, was small compared with gas supply losses of around 19.6 bcfd during Winter Storm Elliot in December 2022 and 20.4 bcfd during the February 2021 freeze.
Kinder Morgan’s (KMI.N), opens new tab El Paso Natural Gas pipeline warned of “strained operating conditions” as spot production at the Permian Basin performed at 93% of scheduled volumes.
In North Dakota’s Bakken shale field, oil production was off by up to 425,000 barrels per day and gas output had fallen by as much as 1.1 bcfd on freezing weather and operational issues, the North Dakota Pipeline Authority estimated on Monday.
“Regional Williston Basin natural gas storage withdrawals are at, or near, record levels,” it said in a statement, adding that shipments of Canadian natural gas were helping backfill some lost volumes.
One billion cubic feet of gas is enough to fuel about 5 million U.S. homes for a day.
At the same time supplies were declining, U.S. gas demand was forecast to jump from 162.2 bcfd on Monday to 174.3 bcfd on Tuesday, according to LSEG data.
That would top the current all-time high of 162.5 bcfd set in December 2022 during Winter Storm Elliott, federal energy data from S&P Global Commodities Insights showed.
In Texas, ERCOT projected power demand would exceed supplies by over 3,700 megawatts (MW) and peak at 86,496 MW on Tuesday at around 8 a.m. local time as “Texans return to work and schools reopen,” which would top the current all-time high of 85,508 MW set in August 2023.
Those estimates, however, are subject to change and do not account for steps the grid operator may take to boost supplies and reduce demand, like its conservation call for Tuesday.
Power prices in ERCOT soared to $1,073 per megawatt-hour (MWh) during the peak 8 a.m. hour on Monday in the grid’s day-ahead market. For the same hour on Tuesday, prices settled at $1,893 per MWh.
That compares with an average day-ahead price of $250 per MWh for all of Monday and an average spot price at the ERCOT North hub , which includes Dallas, of $23 so far in 2024 and $80 in 2023.
Elsewhere, spot power and gas prices soared to multi-year highs across the U.S. and Canada. Prices at the Mid-Columbia hub at the Washington-Oregon border soared to a record high of around $1,075 per MWh, according to LSEG data going back to 2010.
