Frost and snowstorms in the United States could cause massive power outages over the next week and push natural gas demand to its highest level of winter, energy analysts say and reliability coordinators.
The surge in demand comes as gas reserves could decline due to freezing of oil and gas wells and pipelines, known in the energy industry as freeze-offs.
According to data from the US Energy Information Administration (EIA), gas provides about 43% of the country’s electricity production and heats about 45% of homes. Rising demand, combined with a drop in supply, could push prices higher next week.
“Production in the Appalachian and Rocky Mountains faces freezing risks as temperatures drop to single digits or below,” analysts at energy consulting firm Gelber and Associates said in a note.
The United States produces about 105 billion cubic feet of gas per day, a third of which comes from the Appalachian region (Pennsylvania, West Virginia and Ohio), according to data from financial firm LSEG and the EIA.
In previous winters, freezes significantly reduced gas production, including a loss of about 16.5 billion cubic feet per day in January 2024, according to LSEG data.
Freezing temperatures in December 2022 reduced supplies by 19.4 billion cubic feet per day, and in February 2021, production was reduced by 20.4 billion cubic feet per day, according to LSEG data.
One billion cubic feet of gas is enough to power about five million homes for a day.
With heating demand increasing, LSEG projects that total U.S. gas consumption, including exports, could reach 156.4 billion cubic feet per day on January 9. This figure compares to the daily record of 168.4 billion cubic feet reached on January 16, 2024, during another brutal winter freeze.
The combination of increased demand and the freeze in January 2024 has pushed spot gas prices at the U.S. Henry Hub benchmark in Louisiana to more than $13 per million British thermal units (mmBtu).
Next day prices at the Henry Hub are currently around $3.65 per mmBtu, the highest levels since January 2024.
ELECTRICITY COMPANIES ARE PREPARING
According to AccuWeather meteorologists, some 250 million people will feel the frigid air in 40 states over the next week. They warned of significant ice accumulations that could cause power outages in parts of Missouri, Illinois, Indiana and Kentucky over the weekend and into Monday.
US energy company CenterPoint Energy said Friday its cold weather action plan is in place for electricity and gas consumers in several states, including Texas, Louisiana, Indiana, Ohio and Mississippi.
Earlier this week, the North American Electric Reliability Corp (NERC), the national reliability coordinator, urged everyone in the electricity supply chain to take action now to ensure the highest levels of reliability .
NERC said it was “particularly concerned about the supply of natural gas, given the importance of production in the Mid-Atlantic and Northeast.”
In February 2021, extreme weather left millions of Texas residents without power, water, and heat for several days and resulted in the deaths of more than 200 people, with the state’s power grid collapsing. striving to prevent its collapse.
