(Reuters) U.S. natural gas demand is on track to reach a record high on Tuesday, as extreme cold hits much of the U.S., stressing power grids and some oil and gas operations.
The February natural gas contract NGc1 closed at its highest level since Dec. 30, 2022, last week as cold weather over the weekend was on track to cut output by freezing gas wells and pipes and boosting usage of the fuel to heat homes and businesses.
In the spot market, prices rose at several hubs, with the U.S. Henry Hub benchmark in Louisiana more than doubling from Friday to hit $9.86 per MMBtu. Transco Z6 in New York increased more than nine-fold from Friday to hit 42.855 MMBtu.
Financial firm LSEG is forecasting total gas use, including exports, will soar to 166.9 Bcf/d on Monday and is expected to rise to 170 Bcf/d on Tuesday. If that happens, demand on Jan. 21 would top the current daily record high of 168.4 Bcf/d, hit on Jan. 16, 2024.
"Demand is expected to be very high and it will lead to a sizable storage draw for this week... production will be reduced due to wellhead freeze-offs even though at this point it is hard to estimate how much gas will be off," said Zhen Zhu, managing consultant at C.H. Guernsey and Company in Oklahoma City.
North Dakota associated wellhead natural gas production was estimated to be down 0.35-0.43 Bcf/d on Monday, due to extreme cold, the state pipeline authority said.
The Electric Reliability Council of Texas (ERCOT), which operates the power grid for most of the state, issued a weather watch for Jan. 20-23 due to extreme cold. ERCOT, however, said it expects normal grid conditions during a weather watch.
PJM Interconnection, the nation's biggest power grid that oversees all or parts of 13 states from Illinois to New Jersey, issued a cold weather alert for Jan. 20-22, with electricity demand to rise to an all-time winter peak.
CenterPoint Energy has activated its emergency operations center and three staging sites in preparation for potential power outages from Winter Storm Enzo, the Houston-based company said on Monday.
Financial firm LSEG said average gas output in the Lower 48 U.S. states fell from 104.2 billion cubic feet per day (Bcf/d) in December to 103 Bcf/d so far in January due mostly to freeze-offs.
