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US natural gas prices in 2013

Hydrocarbon Engineering,

According to the latest Today in Energy from the US EIA, average wholesale prices for natural gas increased significantly throughout the US last year compared to 2012. The average price for natural gas at Henry Hub in Erath, Louisiana, the key benchmark location for pricing US natural gas rose 35% to US$ 3.73 /million Btu in 2013. Between March and April of last year, increased winter demand pushed inventories down and prices up to above US$ 4 /million Btu, but decreased consumption for electricity generation over the summer and positive production growth kept the 2013 prices at the lowest level seen since 2002.

The price increases have been relatively uniform, except in the Northeastern states where cold weather driven demand spikes have exacerbated the impact of pipeline constraints in Boston and New York City markets. The price of natural gas often falls into seasonal patterns and this did hold true last year. However, regional patterns also have to be considered as well as affected production volumes and the futures market.

Key trends January – April 2013

  • Record withdrawals in March rounded off a return to seasonally cold temperatures during the 2012 – 13 winter.
  • Increased withdrawals had several causes including; record high starting inventories, lower net imports and commercial demand alongside relatively high levels of winter electric power sector consumption.
  • In April, Henry Hub prices averaged US$ 4.17 /million Btu, more than double the level year on year.

Key trends May – December 2013

  • High injections took place during the initial summer months, the result of modest increases in production and a reduction in electric power sector consumption from year ago levels.
  • Cool summer temperatures and relatively higher prices made natural gas less competitive with coal.
  • In September and October prices rose slightly and approached the US$ 4 /million Btu mark in November.
  • In December, seasonally cold weather pushed prices above US$ 4.50 /million Btu.

Regional price differences

  • In January and December of 2013, prices at the Algonquin Citygate hub which serves the New England and Transco Zone 6–NY was affected by demand spikes driven by cold weather.
  • The cold snaps pushed New England and New York spot prices well above the national average due to the pipeline constraints that prevented supply from increasing to meet higher demand.
  • Price increases were muted in the Leidy Interchange Hub, Pennsylvania last year as there was a supply backlog from increased Marcellus production. 

Adapted from a press release by Claira Lloyd.

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