Higher Gas Prices Are Coming

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The summer has come with a bang, and after a subdued shoulder season for North American gas markets, demand is expected to soar.

Rigzone reports : Ade Allen, a Rystad Energy Analyst, made this statement in a Tuesday update to Rigzone on the North American gas and LNG market.

As temperatures climb across the area and more cooling is required in homes and businesses, Allen warned that gas prices will soon increase. “Strong supply and cooler weather kept prices low in the last few months,” Allen said in the report.


“The frequency of Cooling Degree Days (CDDs) has a significant impact on gas demand,” he continued. “And as much of the U.S. deals with a crippling early-summer heat wave, there will be a material uptick in gas demand.”


Due to minimal coal-to-gas switching and domestic gas prices being competitive, Allen highlighted in the report that Rystad modeling predicts daily Lower 48 gas power consumption will approach 50 billion cubic feet per day this summer.


In the summer months of June through August, Allen stated, “We expect gas for power demand to average 42.4 billion cubic feet per day, with demand peaking in July at 45.0 billion cubic feet per day.”

“South-Central and East regions will utilize the most, averaging 12.7 billion cubic feet per day and 18.5 billion cubic feet per day, respectively,” the author continued.


Trajectory of CDDs

As Rigzone reported :
Domestic balances would be significantly impacted by rises in gas-for-power demand as the trend of CDDs alters with warmer weather, Allen said in the report.

“Our estimates indicate CDDs will average 332 Fahrenheit days over the summer period (June to August), which is comparable with the same period in 2022,” he continued.

“Weather is unpredictable and our forecasts are conservative as a result, so if temperatures are warmer than the three-year average, gas for power demand averages will be higher than expected,” the meteorologist added.

As temperatures in Texas are predicted to average above 100 degrees Fahrenheit this week, possibly stressing the system, Allen warned that this week might be a forerunner for regional gas demand overshooting predictions.

According to the Electricity Reliability Council of Texas (ERCOT), natural gas made up around 56% of the fuel mix as of yesterday (Monday), Allen added.

“At those levels, natural gas is running at around 81 percent utilization relative to summer capacity, so if temperatures remain elevated, the regional market can expect higher gas demand,” he continued.

To Read More on the article : https://www.rigzone.com/news/pricier_gas_is_on_the_horizon-22-jun-2023-173154-article/
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