Natural gas prices at SoCal Citygate, the major price hub in Southern California, averaged $3.61 per million British thermal units (MMBtu) in December 2023—the lowest December price since 2015 when adjusted for inflation—according to data from Natural Gas Intelligence. The main drivers for the low price this past December were:
Annually, natural gas consumption typically peaks in California during December. The unusually high natural gas prices at the end of 2022 were partially due to weather-related demand. November 2022 was the coldest November in California since 2000. California experienced 399 heating degree days (HDDs) in November 2022, compared with 229 HDDs on average over the previous five Novembers, followed by a very cold December. Temperatures in California were higher in December 2023 compared with December 2022, resulting in 140 fewer HDDs than in December 2022 and 67 fewer HDDs than the previous five-year (2018–22) average for December.
These warmer temperatures helped reduce consumption in the combined residential and commercial sectors by 21% in December 2023 compared with December 2022, a 20.8-billion-cubic-feet (Bcf) reduction, according to data from S&P Global Commodity Insights. December 2023 consumption was 19% less than the previous five-year average. Lower temperatures reduced consumption, which in turn, led to reduced natural gas prices.
Higher natural gas storage inventories in California also put downward pressure on December Southern California natural gas prices in 2023. In 2022, working gas supply was 185.5 Bcf at the start of December, according to our Natural Gas Monthly. This volume was the least natural gas in California storage at the beginning of December since 1997, when volume totaled 184.3 Bcf. Beginning in December 2023, working gas stored in California totaled 249.3 Bcf, the most since 2020 when 276.1 Bcf was held in storage in California. This increase was partly a result of the California Public Utilities Commission decision to let Southern California Gas Company (SoCalGas) increase its working natural gas capacity.
Increased hydroelectric power generation and restored pipeline capacity in the Southwest also reduced December year-over-year natural gas prices. A series of atmospheric rivers during the 2023 water year helped boost conventional hydroelectric power generation in California by 81% in 2023 compared with 2022, according to our Electric Power Monthly.
El Paso Natural Gas Line 2000, an interstate pipeline that delivers natural gas from the Permian Basin to SoCalGas’s Southern Zone, was returned to service in February 2023 after being shut down in August 2021, increasing access to lower-priced natural gas. The capacity at SoCalGas’s Northern Zone—which includes receipt points at Topock, Needles, and Kramer Junction—was raised to 1.4 Bcf/d in November 2023, representing almost 90% of its capacity prior to the shutdown of Line 235-2 in October 2017.
Source: EIA
Source: Hellenicshippingnews.com
