Natural gas glut getting chipped away
A heatwave in the US Midwest has boosted Canadian natural gas exports as residents of cities from Dallas to Chicago struggle to keep cool in the midst of record-setting temperatures.
Above normal temperatures have pushed seasonal air conditioning demand to the highest level in four years and the Midwest is expected to endure warmer than normal temperatures through to Sept. 30, according to MDA Weather Services.
According to Bloomberg, natural gas flows to the Midwest are up 7 per cent in the last week, reaching 1.7 Bcfd on Thursday. This is the highest level since May13.
“We’re going to continue to see that record power demand for a few days,” Phil Flynn, senior market analyst at Price Futures Group Inc. told Bloomberg. “We’ll be back to the pattern of below-normal injections. It could really set the stage for higher prices.”
Prior to the heatwave, US natural gas inventories rose 97 Bcfgd last week, compared to the five-year average increase of 73 Bcf, according to the US Energy Information Administration.
Hurricane Irma is blamed for the increase as the demand for fuel in Florida and parts of the Southeast declined.
But, demand for electricity generated by natural gas rose in the Midwest to 4.4 Bcfd, the highest in the month of September for at least the last four years, according to Bloomberg data.
“Around this week, historically, you start to see some declines” in gas demand for power, Jacob Fericy, an analyst at Bloomberg New Energy Finance, said. “It’s the largest we’ve ever recorded at this time of year.”
Spot power for Chicago was up 30 per cent to $88.51/megawatt-hour, the highest since May.
The high temperatures are expected to continue to the end of the year. The US Climate Prediction Center said on Thursday that the Midwest has about a 50 per cent chance of being warmer than normal through to December.
