Natural Gas Prices Go Up as Temperature Goes Down

US natural gas prices are expected to increase over the coming days as the market adopts a pessimistic stance, expecting an encore to last year’s failures despite increased production and improved infrastructure.

Natural gas future contracts slated for a January delivery increased in value over the last 24 hours by almost 5 percent, reaching US$3.912 per million BTU, according to Bloomberg. This is on top of a previous 6.7 percent spike in value. Weather forecasts are predicting temperatures below previously expected levels for western states, midwestern states and southern states of the US for the first five days of 2022, with some municipalities expected to go below record levels for the first 10 days of the new year. 

CFE, SENER and CENAGAS are yet to make any comments on how they are expecting this to affect their purchasing power of imported natural gas over the new year. However, weather forecasts are expected to vary quite a lot over the coming days, so the degree to which January 2022 will see a repeat of the conditions experienced in January 2021 is yet to be determined. The state of Texas allotted a number of new infrastructure investments to its natural gas pipeline and distribution network to avoid going through last year’s unfortunate events, but independent analysts have suggested that it was not enough.

A factor that could keep prices down is a record level of US natural gas production reached between October and December of this year according to the EIA. A level of 97.2Bcf/d was previously reached in November 2019, establishing a new record, while a level of 97.5Bcf/d is expected to be reached by the end of December 2021, shattering that previous record. This has led to higher levels of stocks and backup storage, further lowering prices. US rig counts for crude oil operations have recovered steadily but have yet to reach pre-pandemic levels. However, rig counts for production operations focused exclusively on natural gas have come much closer to recovering those same pre-pandemic benchmarks (although they are still far from their highest 2019 levels). 

Another factor that could affect prices is the possibility of another cybersecurity threat against natural gas infrastructure companies. Natural gas supplier Superior Plus has confirmed to CPO Magazine that it discovered a ransomware attack on Dec. 12 that disrupted its computer systems, not unlike the one suffered by Colonial Pipeline earlier in 2021 that caused fuel shortages in the US East Coast.