Flush US natural gas reserves are good news for consumers

The price of natural gas in the futures markets here in the US has been falling all week. As of Friday afternoon, it was down about 25% since Wednesday of last week. It hasn’t been this low since July.

Why? Well, this week the Energy Information Administration reported that we have built up gas supplies that are larger than expected. In the last week alone, we’ve saved more than any other week since May of last year.

That’s why. What about the how?

Let’s start with an explosion that occurred in June at a liquefied natural gas export facility in Freeport, Texas. No one was injured, but exports were halted.

“This plant consumes about 2% of the US gas supply,” said Jacques Rousseau, managing director of ClearView Energy Partners. “And so this gas was diverted to market and not shipped overseas.”

The weather hasn’t been that hot lately either. Less air conditioning means less need for natural gas to generate electricity, observed Wood Mackenzie’s Eugene Kim.

“All of this is happening while US gas production is at record levels,” Kim said.

Production is increasing because prices were relatively high. This increase in supply bodes well for consumers, said Anna Mikulska of Rice University.

“Hopefully that means that if we have a cold winter, we’ll have stocked up enough that it won’t cause us any problems, or at least won’t affect our prices too much.”

This may not be good news for Europe, which really needs natural gas to replace lost supplies from Russia.

Mikulska said that’s because the US is already liquefying and exporting as much as it can. “Just as the US is infrastructure constrained in exporting LNG, Europe is infrastructure constrained in importing LNG.”

Europe’s natural gas stocks might not survive the winter, she added.

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