As Temps in Northeast Spike, M-U NatGas Spot Prices Spike Too
Weather always has been, and remains, THE prime factor in the price of natural gas. In wintertime cold temps lead to the use of more natural gas to burn as heating fuel. In the summer months, high temps mean more electricity is used to power air conditioning units. Last Friday forecasters predicted a spike in temps in the midsection and northeast parts of the country. Along with that forecast came a spike in the price of electric power in both regions, and closely tied to it, a spike in the price of natural gas in both regions.
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Two weeks ago we brought you the sad news that completion and startup for Equitrans’ 303-mile Mountain Valley Pipeline (MVP) and the company’s 75-mile extension to it called MVP Southgate will now be delayed until 2022 and 2023 respectively (see 
Due to a severe winter storm in the nation’s midsection in February, natural gas spot prices across the country went crazy (see 
The U.S. Energy Information Administration’s (EIA) most recent monthly short-term energy outlook (STEO) contains some disheartening numbers regarding natural gas production and consumption. EIA, with some of the best number crunchers in the business, predicts natural gas production will hit 91.41 billion cubic feet per day (Bcf/d) in 2021 and 93.29 Bcf/d in 2022. The current all-time high was 93.06 Bcf/d, hit in 2019 prior to the pandemic. That’s the good news. The bad news is that consumption (i.e. demand) is forecast to decrease even further this year and next year.
According to S&P Global Platts, natural gas production from the Marcellus/Utica in 1Q21 is up nearly 1 billion cubic feet per day (Bcf/d), now averaging 33.2 Bcf/d. That’s an increase of 2.8% compared with 1Q20. The problem is the interstate transmission pipelines flowing M-U gas are nearly full and the increase in production means we are beginning to see too much natgas piling up, leading to lower spot prices here in the northeast. However, not all sub-regions in the M-U are seeing an uptick in production.
Good news. The expert forecasters at the U.S. Energy Information Administration (EIA) have had another look at their predictions for how much natural gas and electricity we will use here in the U.S. and decided to boost their projections for 2021 and 2022. Electric use will grow, EIA says, by 2.1% in 2021 over 2020. As for natural gas, EIA says average daily marketed gas production will increase by 610 million cubic feet per day (MMcf/d) in 2021 to 98.95 billion cubic feet (Bcf/d). EIA is now predicting natgas production in 2022 will increase by 1.7 Bcf/d to 100.63 Bcf/d. We’re pretty sure that would be a new, all-time record high.
Just two weeks ago we reported on the historical, insanely high natural gas spot prices being paid across the country (see 
On Monday of this week we reported about natural gas withdrawals from underground storage for the week ending Feb. 12, which were the twelfth largest on record since 2010 and the biggest one-week withdrawal in the past two years (see 
While the recent spike over the past week in natural gas prices was a fluke, an anomaly due to a rare snow and freezing cold event in the nation’s southwest and Midcontinent regions, the long-term price of natural gas has not moved all that much. The NYMEX futures prices for natgas month by month for the foreseeable future has stayed under or just above the $3/MMBtu mark. Yet we continue to see predictions of alarm that we’re heading for a natgas shortage and with it, a rise in gas prices.
It really is frightening how stupid some of our nation’s leaders really are. They don’t even understand basic economics 101 (they likely never took the class in college). Example: U.S. Sen. Tina Smith from Minnesota (Democrat) who wants federal regulators to investigate the recent spike in natural gas prices, which soared to record levels–into the hundreds of dollars per Mcf. Smith apparently doesn’t understand simple economics and the law of supply and demand.
Just yesterday we told you about the craziness in natural gas prices in Oklahoma (and elsewhere, like Texas) that happened last Friday, when the cash price for natgas hit $600 in trading at one hub in the Sooner State (see 
Supply and demand, that’s what it’s all about in a pure commodity market like natural gas. Supply and demand just about came off the rails last Friday in Oklahoma as the price of natural gas selling along Oneok Gas Transmission’s (OGT) 23 interstate and 20 intrastate pipeline connections entered the stratosphere. At one point the cash price for natgas in OK was fetching $600/MMBtu! No, this is not a joke. That’s the highest price paid for natgas…ever.
Yesterday we told you that natural gas spot (i.e. cash) prices at various pipeline trading hubs had hit fresh, one-year highs, including here in the Marcellus/Utica (see