July 2022 — Energy News
Demand Continues To Grow For U.S. Natural Gas
From the war in Ukraine and subsequent energy crisis in Europe, to continued growth in natural gas power generation and record-high temperatures, the demand for U.S. natural gas continues to grow.
Over the last twelve months, the U.S. has experienced consistently higher natural gas prices, with the Henry Hub spot price nearly double that of July 2021. Although the U.S. experienced a 16 percent drop in prices last month, much of that was attributed to a fire taking the second largest liquified natural gas (LNG) export facility offline.
RECORD HIGH TEMPERATURES
For much of the U.S., this summer has been one of the hottest and driest summers in history. This week more than 40 million people are under a heat alert with temperatures 10 to 15 degrees above normal. As temperatures continue to climb, people are turning their air conditioners lower to stay cool, stressing the power grid and driving up demand for natural gas-generated electricity. According to the Energy Information Administration (EIA) report on July 14, 2022, demand for electricity generated by natural gas is up more than six percent from last year.
PRODUCTION NOT MEETING DEMAND
Earlier this year, production matched pre-pandemic levels; however, the rapid growth in LNG exports and growth in U.S. domestic demand has risen above 2019 levels. Working gas in underground storage is nearly 12 percent lower than the five-year average at 2,369 Bcf.
TEMPORARY REDUCTION IN LNG EXPORTS
On June 8, the Freeport LNG export terminal was taken offline due to a fire. This facility is the second largest LNG export facility in the U.S. with a capacity of 2 Bcf per day that is now being diverted for domestic consumption. This has brought temporary relief to the market; however, the facility is expected to reopen later this year.
There are many things impacting the short and long-term outlook for natural gas. If you have any questions or would like to discuss your natural gas further, please contact your sales representative.