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Lower 48 Natural Gas Producers, Consumers Could Feel Pinch from Spring Drought
The National Oceanic and Atmospheric Administration (NOAA) is predicting expanded drought conditions for much of the Lower 48 this spring, foreshadowing significant implications for natural gas producers and consumers.
“Severe to exceptional drought has persisted in some areas of the West since the summer of 2020 and drought has expanded to the southern Plains and Lower Mississippi Valley,” said NOAA’s Jon Gottschalck, Operational Prediction Branch chief. “With nearly 60% of the continental U.S. experiencing minor to exceptional drought conditions, this is the largest drought coverage we’ve seen in the U.S. since 2013.”
In addition to predicting “persistent, prolonged drought” in the West for the second straight year, NOAA expects “above-average temperatures from the Desert Southwest to the East Coast and north through the Midwest to the Canadian border from April to June.”
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AccuWeather’s Paul Pastelok, senior meteorologist, told NGI his company expects the worst of the drought conditions to again occur in Colorado, most of the Southwest and the entire western Plains region.
Moreover, AccuWeather is forecasting intensifying drought conditions in California.
Worsening drought conditions could lead to less hydroelectric power generation, prompting electric utilities to rely more heavily on natural gas-fired power to fill the gap, a U.S. Energy Information Administration spokesperson told NGI.
“This could then affect prices that utilities pay for their natural gas, which are then passed down to the end-users via purchased gas adjustments,” the spokesperson said.
Demand for natural gas in storage and liquefied natural gas exports has been robust.
Pastelok said the top two natural gas-consuming states, “Texas and California, could be in the thick of the drought conditions.”
He also pointed out that reduced water availability could require oil and gas producers and petroleum refiners to seek alternative water supplies for their operations or even temporarily shut down.
“Higher demand for natural gas leads to higher costs,” he said.
Accuweather, which issues its own drought outlooks for clients, anticipates “the monsoon starting in late June and July can help with water supply in the Southwest and could help to level off prices of natural gas if prices are still rising then,” added Pastelok.
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