U.S. natural gas prices have surged to the highest level for more than 18 months as stocks continue to build more slowly than normal despite the warm weather, according to a recent article by Reuters.
The price for natural gas at a critical U.S. delivery point has risen by 11 percent since the end of September and is up by almost 44 percent since hitting a low back in February. “Futures markets are sending an urgent signal to gas producers about the need for more drilling and to electric utilities to run gas-fired plants for fewer hours this winter to conserve stocks,” the article states.
Gas stocks typically rise between April and October and then draw down between November and March, but stocks have increased much more slowly than usual this year, according to Reuters. “The result is that the gas market has swung from a huge surplus at the end of the first quarter close to balance by the end of the third quarter and is on track for a deficit in 2017,” the article states.
At the same time, gas exports have risen to record levels this year, and domestic consumption has increased sharply as power producers have burned record quantities of cheap gas. Power producers have installed an increasingly large fleet of gas-fired plants and have run them for more hours this year, according to Reuters.
“The mild start to the heating season should have caused gas stocks to rise more than usual,” Reuters wrote. “But instead they have continued to build by less than normal. The continued tightening of the supply-demand balance despite a mild start to the heating season has sparked concerns about a potential deficit in 2017 unless production increases and consumption growth slows.”
To read the Reuters article, click here.
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