NEW YORK: US power and natural gas prices in Texas and the Northeast soared - with some gas prices hitting multiyear highs - as extreme cold and snow blanketed much of the country, freezing oil and gas wells and causing gas pipelines into New England to become constrained as heating demand spikes.
A deep freeze enveloping most of the United States combined with a massive winter storm brewing in the Midwest to leave two-thirds of the nation under extreme weather alerts. The storms knocked out power to more than 1 million homes and businesses in the eastern half of the country and in Texas.
Extreme cold across much of the United States brings back memories of the February freeze in 2021 when oil and gas wells froze in Texas and other states and the Texas electric grid operator was forced to impose rolling power outages as power plants shut for lack of fuel.
“Our assumption is this cold snap will not be as deep nor as-long lasting as the deep freeze that hit (Texas) in February 2021,” said Richard Joswick, head of global oil analytics at S&P Global Commodity Insights. Massive power outages in Texas are “less likely as gas/power operators have learned from their experiences in 2021.”
Gas output dropped about 6.5 billion cubic feet per day (bcfd) over the past four days to a preliminary nine-month low of 92.4 bcfd on Friday as wells froze in Texas, Oklahoma, North Dakota, Pennsylvania and elsewhere. That would be the biggest drop in gas output since the February 2021 freeze.
One billion cubic feet is enough gas to supply about 5 million US homes for a day. Earlier this week, power and gas prices on the West Coast and Midwest soared to multiyear highs as the winter storms froze those regions.
In West Texas, next-day gas at the Waha Hub in the Permian Shale jumped 22% to around $9 per million British thermal units (mmBtu), their highest since hitting $77 during the later stages of the February freeze of 2021. Waha prices hit a record high of $210 at the height of the February 2021 freeze.
In New England, gas for Friday at the Algonquin hub soared 361% to a near 11-month high of $30 per mmBtu. Gas prices in New England hit a record high of around $83 in January 2018.
About half of the power generated in New England comes from gas-fired plants. But on the coldest days, power generators burn a lot of oil and gas from liquefied natural gas supplies, which are more expensive and boosts electric costs, because most of the region’s pipeline gas is being used to heat homes and businesses.
In New York City, gas for Friday soared 346% to $28 per mmBtu, its highest since hitting a record high of $140 in January 2018.
Next-day power, meanwhile, soared 92% to a five-month high of $200 per megawatt hour (MWh) in New England, 121% to a four-month high of $149 at the PJM West hub in the Mid Atlantic and 386% to a four-month high of $282 in Ercot North in Texas.
Gas and power prices in several parts of the country were on track to hit their highest annual averages in 2022, including gas at the Southern California border and power in New England and the Mid Columbia hub in Washington state.
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