The price of natural gas reached a four-year high Friday as continued frigid temperatures throughout much of the country have led to unusually high demand.
The futures price for natural gas jumped 45 cents, or 10 percent, on the day to close at $5.18 per thousand cubic feet.
“We've seen a fundamental shift in gas pricing,” said Tony Say, president of Oklahoma City-based Clearwater Enterprises. “There's plenty of gas out there, but with these next few weeks of cold weather, we could be depleting storage numbers to dangerously low levels come April 1.
“There's going to be a big push to put gas back into storage this summer. If it's a hot summer, perhaps there could be significant summer usage and we could go into the following winter with very low numbers in storage.”
April 1 is considered the end of the winter natural gas withdrawal season and the beginning of the injection season when storage is refilled.
The country's natural gas storage supplies fell to 20 percent below year ago levels even before the current cold snap.
“We've got record demand, record withdrawals from storage, and short-term production is threatened,” energy analyst Stephen Schork said. “It's a dangerous market right now.”
Natural gas is used by half the nation's households for heating, making it the most important heating fuel. Electricity is the second most popular heating source, and electric power generators use natural gas to generate power more than any other fuel except for coal.
Largely dependent on weather trends, which affect heating and electricity generation rates, natural gas prices are notoriously hard to predict.
“With weather the way it has been and storage levels and pipeline capacity issues, I can't sit here and tell you today where gas is going to be six months from now because I think it would be wrong,” Say said.
The Marcellus Shale in the Pennsylvania area is one of the few areas in the country where producers are drilling wells searching only for natural gas. Throughout the rest of the oil patch, producers are searching for oil, although most such wells still produce large amounts of natural gas.
Say said he does not expect the recent price spikes to lead companies to refocus on natural gas anytime soon.
“People already have their budgets set for 2014,” he said.
“Oil is still the key player. Those numbers are very robust. There could be some new gas come on, maybe, but it's not going to be a significant number. People are not going to run out and make the same mistake they made in the past and bring on a ton of new gas so it tanks the market again.”
While companies have moved away from dry natural gas wells, natural gas still represents a large percentage of most Oklahoma producers' haul.
“It certainly helps with their gas prices,” Say said.
“February should be over $5 for Oklahoma gas, which is something we haven't seen in a long time. It's going to help their cash flow and that of the state. It's very positive for Oklahoma producers.”
CONTRIBUTING: The Associated Press
We've got record demand, record withdrawals from storage, and short-term production is threatened. It's a dangerous market right now.”