The frigid blast of pre-winter weather has some concerned about natural gas supplies and whether they’re adequate to meet the winter demand.
Temperatures plunged in Oklahoma in the past week into the teens while wind chills were in the single digits. But natural gas prices backed off after climbing to their highest level in eight years.
Prices have been driven by “a sharp cold revision in the winter weather outlook,” said Devin McDermott, a commodities strategist at Morgan Stanley who was interviewed by Bloomberg News. “We see modest downside from here assuming current weather forecasts, but a very wide range of potential short-term prices.”
It was only on Tuesday that gas exceeded the $4 mark for the first time in four years. The fuel surged this month amid concern that stockpiles, at a 15-year seasonal low, won’t be enough to help meet winter heating needs, even as production hovers near a record. In North America, gas stowed in underground aquifers and salt caverns in summer months is used to supplement supplies pumped from wells during winter.
The premium for March 2019 gas over the April contract jumped as high as $1.745 on Wednesday, the widest in data going back to 2015. The March-April spread, dubbed the “widowmaker” for its volatility, is an indicator of how precarious supplies may be at the tail end of winter.
Domestic and foreign demand for American gas has climbed to all-time highs. Cheniere Energy Inc. said Wednesday it started producing liquefied natural gas at its new $15 billion Corpus Christi export terminal in Texas, the third such plant to begin operating in the continental U.S.
