Gas demand from US power generators continues at record pace in July

Gas demand from US power generators continues to trend at record levels this summer, with sweltering temperatures forecast across the central US from mid- to late July promising more of the same.

Month to date, gas-fired power burn has averaged 43 Bcf/d matching record levels recorded in summer 2020 and outperforming last July's average by 5.8 Bcf/d, or about 15.5%. Last month, demand from US generators outpaced its June 2020 average by some 2.8 Bcf/d, or about 8%, setting a new record for the month at 38.6 Bcf/d, data from S&P Global Commodity Insights shows.

Hotter weather this summer is partly responsible for the uptick in power demand. From June 1 to date, the US population-weighted temperature has averaged 76.2 degrees Fahrenheit, which compares with an average 75.7 F over the six-week same period in 2020.

Even controlling for temperatures, though, power burns are higher this summer compared with 2020 – likely as a result of changes in the generation stack and other constraints on fuel switching this summer.

Burn per degree

At a population-weighted temperature of 70 degrees, sample US power burn demand is about 1 Bcf/d higher this year than it was in 2020. At 75 degrees, burns are about 1.5 Bcf/d higher this summer.

Given Platts Analytics' modeled power burn data also controls for population size, it makes sense to use sample data to avoid a double-weighted comparison. The scatterplot of sample burns and weighted temperatures referenced here, though, also likely underestimates the baseline difference in power demand at a give temperature this year, compared with 2020.

Record power burns this summer come in the wake of major changes in the generation stack. Over the past 12 months, the US power industry has retired some 34 coal-fired power plants with a total estimated capacity of nearly 12.9 GW. The recent plant closures add to even larger waves of coal-plant retirements in prior years, making natural gas the US' increasingly dominant thermal fuel source.

Constraints on thermal coal supply this year – resulting from low production and inventory levels and strong exports – have further increased US generators' reliance on gas to meet peak-summer cooling demand.

Forecast

Over the next eight to 14 days, much of the central US stretching from the Dakotas to Texas and Kansas to Indiana, now faces a 60%-70% chance for above-average temperatures, according to an updated short-term forecast from the US National Weather Service.

Through late July, high temperatures in Wichita, Saint Louis and Memphis will trend in the mid- to upper 90s F. In Oklahoma City and Dallas, the highs are forecast to reach over 100 F.

According to Platts Analytics, US power burn will average close to 43.5 Bcf/d over the next two weeks amid strong expected demand from Texas and states across the Midcontinent and the Upper Midwest.