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Large drawdown in gas supplies sparks price-spike

A big decline in the amount of natural gas in storage in the US along with damage to a major pipeline has led to natural gas futures surging.

The US Energy Information Administration today reported another weekly decrease in the US stockpile of natural gas. Gas in storage declined by a larger-than expected 237 billion cubic feet (bcf) to 1686 bcf. Stocks fell 262 bcf in the week prior.

According to the EIA the five-year average is a 162 bcf decrease at this time of year. Persistent, severely cold weather in many parts of the US has been driving supplies lower in recent weeks, as demand soars. Roughly half of US households are heated by natural gas, according to EIA data.

By mid-afternoon in New York, the price of natural gas futures had risen 7.19% to $5.175 per million British thermal units. The price of natural gas has climbed around 19% so far this year.

The price of natural gas had already been boosted today by news of an explosion at a key gas pipeline in southern Kentucky. The Columbia Gulf Transmission pipeline, which carries natural gas from the US Gulf Coast to the northeast and midwest of the country, has been forced to shut down. This comes at a difficult time with demand driven so high by wintry conditions.

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