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Flush US Natural Gas Reserves is good news for consumers

The price of natural gas in the futures markets here in the United States has fallen all week. By Friday afternoon, it was down about 25% since Wednesday of last week. It has not been this low since July.

Why? Well, this week the Energy Information Administration reported that we had accumulated a larger supply of gas than expected. Last week alone we spent more than any week since May of last year.

That’s why. What about the how?

Let’s start with an explosion, the one that occurred in June at a liquefied natural gas export facility in Freeport, Texas. No one was injured, but exports were halted.

“This facility uses approximately 2% of the gas supply in the United States,” said Jacques Rousseau, managing director of ClearView Energy Partners. “And so that gas was redirected into the market, and it wasn’t shipped overseas.”

The weather hasn’t been that hot lately either. Less air conditioning means less demand for natural gas to generate electricity, observed Eugene Kim of Wood Mackenzie.

“All of this is happening while supply, gas production in the United States is at record highs,” Kim said.

Production is up because prices have been relatively high. This accumulation of supply is a good sign for consumers, said Anna Mikulska of Rice University.

“That hopefully means that if we have a cold winter we’ll have storage filled to the point that it won’t cause us any problems or at least not impact our prices too much.”

This may not be good news for Europe, which badly needs natural gas to replace the lost supply from Russia.

Mikulska said that was because the United States was already liquefying and exporting as much as possible. “Just as the United States is limited by infrastructure when it comes to exporting LNG, Europe is also limited by infrastructure when it comes to importing LNG.”

Europe’s natural gas supply may not last all winter, she added.

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