Researched by Industrial Info Resources--U.S. natural gas prices are retreating from recent highs triggered by a surge in demand, a surge that came tacitly as a response to climate change.
Henry Hub, the U.S. benchmark for the price of natural gas, has been on a wild ride as of late. The benchmark surged some 11% at the end of May, but it's only about 3.5% higher than month-ago levels.
Prices jumped by 8.3% between June 5 and June 8, but lost 4% on the last trading day of the week to close at $2.25 per million British thermal units (MMBtu). Henry Hub averaged $1.91/MMBtu over the first five trading days of June.
Data sent to the U.S. Energy Information Administration (EIA) from S&P Global Commodity Insights show domestic gas production increased by 0.1% week-on-week to June 9, while gas production declined by 0.6%. Canadian deliveries jumped by 18.6% as wildfires in Canada subsided and reopened pipeline and production corridors.
Total consumption in the U.S. market, meanwhile, jumped by 7.5% to 4.7 billion cubic feet per day (Bcf/d). In just the power sector, demand increased by 17.6%, or 5.4 Bcf/d week on week, data show.
The latest monthly report from the EIA points to a steady future, and electricity sales over the June to August period are expected to be lower than last year, "mostly because a reduction in manufacturing activity reduces industrial electricity consumption by 2%."
The U.S. economy is indeed slowing as efforts to control consumer-level inflation created stronger and stronger headwinds for growth. EIA data show the amount of natural gas in storage was 15% above the five-year range at the end of May, compared with levels that were 14% below the five-year average at the end of May 2022.
Strong production and adequate storage would normally balance out any surge in demand, though Mother Nature has an interesting way of making her presence known. The climate is changing, and it is changing so much that parts of the world that would normally not see long periods of hot, dry weather are seeing different patterns emerge.
Data show that Canada, for example, is getting hotter and drier because of human-related activities. The federal government expects that provinces near the Atlantic Ocean could be as much as 4 degrees Centigrade warmer by 2050.
That in part helped set the conditions for a rare outbreak of fires in the eastern provinces. That in turn led to a staggering decline in air quality across much of the eastern half of North America, with an eerie orange sky over Manhattan. That changed not only air quality, but also the energy landscape. Natural gas is seen as something of a bridge to a cleaner future relative to coal. And though natural gas is cleaner than coal, it's still a polluting fossil fuel. But the alternatives are ironically far more weather dependent than natural gas.
Orange haze, for example, does little to support solar power, a detriment to the energy transition given the importance of solar power on the U.S. grid.
"Solar has been the leading source of new generating capacity in the United States so far this year, and the new capacity contributes to our forecast that U.S. solar generation this summer will grow 24% from summer 2022," the EIA stated.
More recently, however, solar power declined to account for just 4% of the power on the grid. Wind power too receded, dropping from an early-May high of 14% to 5% last week.
Both factors combined to lead to an increase in the use of fossil fuels, the very fuels that may be contributing to climate change.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
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