Temperatures exceeding 100 degrees along the East Coast provided a spurt of demand in the electric power sector, as power generators ramped up to meet air-conditioning needs. Overall consumption was an estimated 3.5 percent higher than last year during the comparable week, according to BENTEK Energy, LLC. By Wednesday, July 7, consumption in the electric power sector had grown to 29.9 Bcf, which was 52 percent higher than at the beginning of the report week. BENTEK estimates that consumption in the Northeast yesterday reached 8.3 Bcf, the highest level of daily natural gas consumption in the electric power sector in the region since BENTEK began providing this data series in 2005. Other factors potentially contributing to price gains this week include continued concerns about tropical storm activity, as well as lower natural gas pipeline imports from Canada and liquefied natural gas (LNG) from overseas. The Henry Hub natural gas spot price averaged $4.76 per MMBtu yesterday, which is 44 percent higher than the year-ago price of $3.30. However, yesterday’s price at the Henry Hub was 22 percent lower than the price of $6.09 per MMBtu at the beginning of 2010.

 

A sharp reduction in imports of natural gas to the United States also likely provided upward pressure on prices. During the report week, net Canadian imports average 7.3 Bcf per day, about 2.8 percent lower than this time last year, according to BENTEK. Additionally, the pace of deliveries of U.S. LNG imports decreased considerably in comparison with year-ago levels. Sendout from U.S. LNG import terminals averaged 0.8 Bcf per day during the report week, which is 36 percent lower than last year at this time. This reduction in LNG imports is occurring at a time when many analysts had expected a greater number of LNG cargoes to be directed to the United States, following production increases in countries such as Russia and Qatar. To the extent LNG cargos have flexibility in delivery locations, supplies are instead heading to Europe and Asia, where LNG prices remain higher than those that have prevailed in U.S. markets. Prevailing prices for LNG deliveries in the month of August are approximately $7.30 per MMBtu in Asia and $6.50 per MMBtu in Europe, according to estimates from Waterborne Energy, Inc.