US natgas demand set to hit record high, spot power and gas prices soar

By Scott DiSavino

Jan 21 (Reuters) - U.S. spot natural gas and power prices soared to multi-year highs in several parts of the country with extreme cold expected to boost gas demand to a daily record high on Tuesday.

Extreme weather has created havoc for power and gas markets in recent years as demand has come close to outpacing supply.

In February 2021, a freeze in Texas killed more than 200 people and left millions without power, water and heat for days after extreme cold caused gas supplies to drop by freezing oil and gas infrastructure, known as freeze-offs.

The nation's biggest power grid, PJM Interconnection, which oversees all or parts of 13 states from Illinois to New Jersey, extended its Jan. 20-22 cold weather alert through Jan. 23, and said power demand could hit a new winter peak from Jan. 20-22.

Gas provides about 43% of the nation's power generation and heats about 45% of the country's homes, according to data from the U.S. Energy Information Administration (EIA). The expected jump in demand, coupled with a potential drop in supplies, could drive up power and gas prices next week.

In the spot market, gas prices rose to their highest since January 2024 at several U.S. hubs, including the U.S. Henry Hub NG-W-HH-SNL benchmark in Louisiana, Waha NG-WAH-WTX-SNL in West Texas, Eastern Gas South NG-PCN-APP-SNL in Pennsylvania, the Southern California Border NG-SCL-CGT-SNL, PG&E NG-CG-PGE-SNL in Northern California and Chicago NG-CG-CH-SNL.

In the Northeast meanwhile, gas prices soared to $43 per million British thermal units in New York, their highest since hitting an all-time high in January 2018, and climbed to $24 at the Algonquin hub NG-CG-BS-SNL in New England, their highest since February 2023.

Soaring spot gas prices boosted next-day power prices to a record high of $275 per megawatt hour at the PJM West Hub E-PJWHDAP-IDX in western Pennsylvania and a 30-month high of $268 in New England E-NEPLMHP-IDX.

That compares with averages in 2024 of $1.98 per mmBtu for gas in New York, $2.88 for gas in New England, $42 per MWh for power at PJM West and $47 for power in New England.

It is common for power and gas prices to spike in New England in the winter.

New England power generators often switch from relatively cheap pipeline gas to more expensive oil and gas from liquefied natural gas imports because gas pipelines into the six-state region cannot carry enough supply to heat the region's homes and businesses and fuel its power plants on the coldest winter days.

BY THE NUMBERS

Financial firm LSEG said average gas output in the Lower 48 U.S. states has fallen from 104.2 billion cubic feet per day in December to 103.0 bcfd so far in January, due mostly to freezing oil and gas wells and pipes.

On a daily basis, freeze-offs have helped cause output to slide by around 3.3 bcfd over the past six days to a preliminary three-month low of 100.4 bcfd on Tuesday.

While curtailments were small so far this winter, analysts and traders warned that freeze-offs could rise with more cold still to come this week.

Freeze-offs in past winters cut gas output by roughly 8.1 bcfd from Jan. 9-16 in 2024, 4.6 bcfd from Jan. 31-Feb. 1 in 2023, 15.8 bcfd from Dec. 20-24 in 2022, and 20.4 bcfd from Feb. 8-17 in 2021, according to LSEG data.

LSEG said total gas use so far this winter peaked at 168.2 bcfd on Jan. 20 and could reach 172.2 bcfd on Jan. 21. If correct, demand on Jan. 21 would top the current daily record high of 168.4 bcfd on Jan. 16, 2024.

One billion cubic feet of gas could supply about five million U.S. homes for a day.

(Reporting by Scott DiSavino in New York and Noel John and Ishaan Arora in Bengaluru; Editing by Jan Harvey)

((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net))