With temperatures as much as 30 degrees below normal in parts of the Rockies, Southwest, and Midwest, consumption remained at elevated levels and prices rose significantly during the report week. Following two weeks of slight decreases, the price at the Henry Hub increased $0.15 per MMBtu to $4.55 per MMBtu. Three months into the 5-month heating season, the colder-than-normal weather this year has resulted in the Henry Hub price gaining $1.13 per MMBtu, or 33 percent, since November 1. However, the price is still well below (17 percent) the price of $5.47 per MMBtu at the Henry Hub this time last year, as storage levels still exceed the average for this time of year and the production outlook for the industry remains strong.
During the report week, price changes at specific market locations depended largely on local weather conditions and constraints in transportation into local markets. Differences in pricing dynamics were evident in the Gulf region, where prices in southern Louisiana and nearby Texas diverged. While market prices in Louisiana generally increased in the range of 20-25 cents per MMBtu, prices in nearby Houston, Texas, climbed more than $0.50 per MMBtu. Demand in Texas for natural gas in the electric power sector soared during the week in order to meet heating needs from the current cold spell. The operator for the electric power grid in Texas on Wednesday noted record-levels of demand for this time of year as well as cold-weather-related mechanical failures at power plants, which has resulted in rolling blackouts across the State.
The largest percent price increases during the week occurred in markets west of the Mississippi River, where there has been little price volatility this winter.In the Rockies and Midcontinent, where weather conditions were extreme and there were numerous reports of declines in production due to icing conditions at producing wells, price increases exceeded well over $1 per MMBtu or about 30 percent. BENTEK Energy, LLC, reported that flows on pipelines shifted significantly as higher demand in localized markets in the Rockies decreased flows on other pipelines that transport supplies out of the Rockies to the east, such as the Rockies Express Pipeline. In addition, numerous Midcontinent and Rockies area pipelines reported constraints on their systems, resulting in losses of flexibility to move gas between regions (see Transportation Notes below). Prices in the Rockies increased at all trading locations. For example, the price for supplies on the Questar Corporation system in Utah increased $1.39 per MMBtu to $5.46, the highest price reported at this location this winter.