2 days Ago By Irina Slav
Winter is near, and so is peak natural gas demand in the northern hemisphere. For the world’s largest natural gas producer, this could mean greater price volatility and potential supply tightness. The predictions come from Wood Mackenzie, which listed in a recent article a total of five factors affecting the natural gas market in the United States this winter.
Control of supply is at the top of the list as natural gas producers respond to persistently low market prices for their commodity. Natural gas prices have been depressed for over a year, and earlier in 2024, producers had enough of that and started delaying well-drilling plans. if(window.
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comes out of oil wells in the shale patch as associated gas. Yet, Wood Mac predicts some tightness when winter demand kicks in—if it kicks in. The energy consultancy lists the buildout in wind and solar as a reason for potential surprises in natural gas demand growth this winter.
Because of this buildout, the pattern of demand fluctuations this winter could be different from the usual one, Wood Mac analysts said, with new demand surges when wind and solar cannot perform. Related: Why the Utility Industry’s Conventional Strategy Could Backfire This raises the question of natural gas in storage and whether there is enough of it to cover such surges. Here, the U.
S. has a problem because building new gas storage capacity has not been a priority for anyone, it seems. “Storage capacity should act as a shock absorber at times of heightened demand or reduced supply.
In recent years, however, little or no new storage has been commissioned,” Wood Mac’s analysts wrote, only to add that interest in storage capacity tends to spike ahead of summer and winter peak demand seasons. The spikes, it appears, have not been high enough to actually motivate adding storage capacity. Per Wood Mac, there is some 50 billion cu ft in new capacity that has been planned—and that is a lot less than the pace at which the gas market in the country has expanded, potentially creating the risk of a shortage in case of a sudden spike in demand.
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enabled_slots.push({ placementName: "oilprice_medrec_btf", slotId: "oilprice_medrec_btf" });`;document.write(write_html);} According to the firm, such sudden spikes are more likely than they were in the past due to climate change, which, they say, is making extreme weather more extreme than before, affecting energy demand.
The report cites the so-called Arctic blast that swept the Lower 48 this January, even though the month as a whole was milder than usual. That blast led to a natural gas demand spike to 163 billion cu ft daily at one point. The fifth factor affecting this winter’s supply and demand for natural gas in the U.
S. is, of course, liquefied natural gas and the impact of its exports on domestic prices, which in turn affect demand. U.
S. LNG exports are quite likely to increase in the coming weeks as Europe’s appetite for the superchilled fuel returns with temperatures dropping. In the first half of the year, this appetite was muted because there was plenty of gas in storage, demand destruction had tempered prices, and spring was on the way.
In the first half of the year, U.S. exports to Europe were weaker than last year.
Now, with the last conduit for Russian pipeline gas to Europe about to be cut off by Ukraine’s Naftogaz after the expiry of the transit contract, Europe will need to fill the gap. As suggested by Commission President Ursula von der Leyen, the filling would likely come from U.S.
LNG as the EU seeks to signal to Trump that it would be happy to raise imports of U.S. energy to possibly avoid tariffs on European exports to the United States.
By Irina Slav for Oilprice.com More Top Reads From Oilprice.com.
