Natural-Gas Exports Lift Prices for U.S. Utilities Ahead of Winter

American utilities are facing the highest natural-gas prices in years as they build stockpiles for winter. The reason: Exporters are sending more gas than ever to countries starved for the fuel. Pipelines to Mexico and Canada and tankers traveling to Europe and Asia have moved record amounts of U.S. gas out of the country this year as parts of the world fall short of supplies. American frackers, meanwhile, are holding the line on new drilling as investors pressure them to maintain capital discipline and return money to shareholders.

The result is that natural-gas exports are pushing domestic prices higher—only the second time this has happened since companies began shipping shale gas from the Gulf Coast to other countries in 2016, other than a brief period during the February freeze in Texas, analysts say.

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The pinch shows a growing tension between exporters and buyers who have enjoyed cheap gas for more than a decade. Some manufacturing and chemical companies have built entire businesses around low U.S. gas prices. Utilities from the Pacific Northwest to New England have filed regulatory requests to raise rates for natural gas this winter, citing a supply squeeze as a result of higher global demand. The Energy Information Administration has forecast that the average U.S. household that relies on natural gas for heating will pay 30% more for the fuel this year.

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As utilities prepare for a surge in demand, the U.S. is exporting a larger share of its natural gas than it ever has and shale producers aren’t quickly ramping up in response to high prices... Meanwhile, some of the biggest natural-gas producers have vowed to keep investments in production growth low. Shale companies EQT Corp. , Chesapeake Energy Corp. , Antero Resources Corp. and others recently told investors high prices haven’t tempted them to spend a lot more money to boost production. The reduced flexibility of supply could make prices volatile if heating demand comes in strong this winter, analysts said. “It’s a big concern if you have a really cold winter,” said Kendrick Rhea, an analyst at East Daley Capital Advisors Inc. “That’s where you get these extreme spikes in prices.”

https://www.wsj.com/articles/natural-gas-exports-lift-prices-for-u-s-utilities-ahead-of-winter-11636281000 (subscription)