Strong crude oil production in the U.S. continues to contribute to significant levels of associated natural gas production, a gas and LNG market update from Rystad Energy Senior Analyst Masanori Odaka stated.
“As such, domestic gas prices remain in the sub-$3.00 per MMBtu [million British thermal units] region, albeit observing some material improvement in recent weeks, with Henry Hub prompt month hovering near $2.70 per MMBtu, as of 20 May, due to surplus production, muted domestic demand, and limited export capacity,” the update, which was sent to Rigzone, added.
The update noted that the latest U.S. Energy Information Administration (EIA) report indicates a slightly smaller than expected 70 billion cubic feet increase in natural gas inventories for the week ending May 10. It highlighted that storage facilities currently hold over 2.6 trillion cubic feet of gas, “with stocks up 17.5 percent year on year and 30.8 percent above the five-year average”.
Rystad’s update also pointed out that there has been an increase in gas flows to LNG export plants, “notably with Freeport LNG in Texas back online after maintenance”. As of May 20, total U.S. LNG exports averaged 12.3 billion cubic feet per day, the update highlighted.
“With Freeport LNG contributing nearly two billion cubic feet per day, we estimate LNG exports are up 5.8 percent compared to April levels,” the update stated.
Gas Consumption
The Rystad update noted that total gas consumption is anticipated to see an uptick in the coming weeks with increased temperatures on the horizon.
“The rise in demand for natural gas is fueled by warmer weather prompting heightened power generation for air conditioning needs,” it said.
“Latest weather forecasts anticipate mostly normal weather across the Lower 48 states until June, with warmer than normal days expected over May 17-25,” it added.
The update warned, however, that some reductions in gas for power demand are expected in Texas “after a tornado in Houston on May 16 caused over 900,000 customers to lose power at the peak of the outage”.
“As of May 20, more than 200,000 are still without power,” the update stated.
“The severe damage to transmission and distribution electric systems has hindered gas demand for power generation,” it added.
“Restoration efforts are ongoing, but full recovery may take longer for the hardest-hit area.
The impact comes just as temperatures in the state are heating up, with weather forecasts predicting higher temperatures throughout May 26,” it went on to state.
Governor Statement on Severe Weather
In a statement posted on the Office of the Texas Governor’s website on May 17, Texas Governor Greg Abbott said, “our hearts are with the families and loved ones of those who tragically lost their lives due to severe weather in Southeast Texas, and we remain in contact with local officials to do everything we can to protect Texans and help our communities recover”.
“As severe weather sweeps through the Southeast region of the state, Texas continues to deploy resources and assistance to impacted communities to ensure the safety of Texans,” he added.
“Last month, I prepared state emergency response resources and issued a disaster declaration. I have since amended that declaration to ensure every community threatened by dangerous weather conditions would have access to necessary resources,” he continued.
In his statement, Abbott said the Texas Division of Emergency Management continued to support impacted communities with immediate and long-term recovery resource needs. He added that the Public Utility Commission of Texas was coordinating with utility providers to restore power to affected areas as quickly as possible.
“I thank the emergency response personnel who are working around the clock to protect their fellow Texans as we respond to this severe weather event,” Abbott said in the statement.
To contact the author, email andreas.exarheas@rigzone.com
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