US natural gas prices rose 18 percent — their biggest one-day gain in eight years — as the onset of winter tests the ability of shale production to supply the country. Nymex December gas gained 73.6 cents on Wednesday to settle at $4.837 per million British thermal units, the highest price for the next month’s contract since early 2014. Futures have risen 48 percent this month. The rise reflects worries that winter heating demand may draw heavily on stocks of US gas in storage that now sit at 3.2tn cubic feet, the lowest in more than a decade for this time of year.
Meteorologists have updated forecasts to predict a cold December and freezing temperatures are already gripping parts of the country. The combination or low gas stocks and cold has returned volatility to a market becalmed by surging supplies from shale formations. “People are very concerned we are not going to have enough storage to get through winter,” said Kent Bayazitoglu, director at Gelber & Associates, an energy advisory group in Houston. Gas stocks ended last winter at depleted levels. An extremely hot summer then required gas-fuelled power plants to meet air-conditioning demand, preventing a rapid replenishment of stocks during what is known as the “injection season”.
The amount of US-produced gas that is exported is also expected to grow to more than 10bn cu ft per day this year, from 6.4bn two years ago, as pipelines carry it to Mexico and new liquefaction terminals load it for shipment overseas. The market had been lulled by the expectation that soaring shale gas supplies would offset the need for gas from storage. The US Energy Information Administration expects US dry gas production to average 83.2bn cu ft/d this year, up from 74.8bn last year.