Price of natural gas approaches $4 due to cold weather in Texas


The world is on the verge of a new global crisis in the field of energy resources due to the unusual frosts that hit the state of Texas. Cold weather is a natural anomaly for this region. Besides, it has been hit by the strongest snowstorm in the last 30 years. So, in Austin, the capital of Texas, the temperature dropped to -5°C and in Dallas to -8°C. At the same time, outside of cities, the air temperature is usually even lower. Texas was left without heating and partially without electricity in record-low temperatures.

Arctic frosts have paralyzed part of energy production. The bad weather caused the partial shutdown of oil production, which eventually decreased by 40%, or 4 million barrels per day. Experts have not had time yet to assess the scale of such a disaster. At first, investors believed that oil production would be stopped only for 2 or 3 days. However, the current situation is likely to continue until the weekend. The full recovery of oil production will recover only after a few weeks

The cost of natural gas also sank significantly due to such a situation. Texas Governor Greg Abbott said on Tuesday that natural gas has frozen in pipelines and wells as there no special equipment for its storage. The climate in Texas is usually warm. As a result, the infrastructure for the production and transportation of natural gas in the state power system ERCOT simply ceased to function. At the same time, homes in Texas are heated with the help of this energy carrier. Most of the local power plants were also left without fuel.

As a result, natural gas futures for March have already approached the level of $4 per million British thermal units (BTU). On the New York Mercantile Exchange, natural gas futures for March are valued at $3.10 per million British thermal units.


Yesterday, before the start of the US session on the Henry Hub platform, futures for March were trading near the highest level in three and a half years - $3,316. By the way, since the beginning of this year, natural gas futures have risen in price by almost 30%. This happened almost simultaneously with the rise in gasoline prices, whose cost this year has risen above other energy carriers.

Although demand for gas from ordinary consumers and businesses is retreating from the high values of the beginning of the week, it still remains at a very high level.

The current level of natural gas production is about 75 billion cubic feet per day, which is lower than the production of this energy carrier in 2018. Gas market analysts expect that the Energy Information Administration (EIA) will announce a sharp reduction in gas reserves, namely by about 252 billion cubic feet (for the week that ended on February 12). In other words, analysts predict a drop in energy production by 47% compared to the previous week. This decrease will be the most noticeable since the time of the historic high of 2018 when gas reserves for the week decreased by 359 billion cubic feet.

The material has been provided by InstaForex Company -