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Bomb Cyclone Sends Natural Gas Prices Soaring

Bomb Cyclone Sends Natural Gas Prices Soaring

Natural gas prices have surged 60 times as the bomb cyclone blizzard conditions have sparked the demand for the fuel across the U.S. Northeast.

Prices have surged to a record $175 per million British thermal units in New York, according to Consolidated Edison (NYSE: ED). That’s compared to the $2.93 that natural gas futures have been averaging so far this winter on the New York Mercantile Exchange.

Source: Bloomberg.

The bomb cyclone has brought with it screaming winds that hit more than 70 mph in some places and whiteout snow conditions that have grounded nearly 5,000 flights, disrupted rail service, shut down schools, and has prompted emergency alerts all along the Northeast. Even as powerful winds cut power to over 100,000 homes and business, electricity prices climbed 126% to $273.23 per megawatt hour, the highest in almost four years. Connecticut opened over 100 warming centers in 34 town statewide for those deprived of heat.

“This string of cold has stressed the market just as much as the polar vortex” of 2014, said the director of natural gas trading at ConEdison, John Borruso. “You are seeing pipeline restrictions and flow restrictions pop up.”

The demand for natural gas has highlighted the lack of adequate pipeline capacity in to the large cities of the Northeast where households have been switching to gas-fired furnaces. Given that, gas in the region is the world’s priciest. Natural gas in the U.S. Northeast commands 14 times more than U.K. futures, and 9 times more than Asian imports of liquified natural gas.

“With demand and price for gas being this high in New York in New England, everybody wants to flow gas into the region but the current pipeline infrastructure cannot carry enough to even the market out,” said Aragon Yavuz, the regional director for Genscape Inc, a real-time power and gas data tracker.

Even as the bomb cyclone heads north, forecasters are expecting it will immediately be followed by a surge of cold air that could break records in cities across the region. The National Weather Service has noted that as the snow recedes, some of the “coldest air of the season” is likely to move in.

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