US nuclear power snags may drain oil/natgas supply
News of degraded reactor vessel heads at two more U.S. nuclear units fueled concern that the problem could sideline several of the nation's 103 nuclear power plants, which generate about 10 percent of the nation's electricity.
Natural gas futures on the New York Mercantile Exchange rose 8 percent this week after news that large nuclear power units in Florida and South Carolina were found with reactor vessel head problems.
The June natural gas contract this week finished up 43.4 cents at $5.689 per million British thermal units (mmBtu).
"The nuclear plants being out helped push natural gas up because of worries that if natgas use has to make up for a large number of nuclear snags, then natgas injections (into underground storage) for winter will suffer," said Mike Fitzpatrick, analyst for Fimat USA.
The two Southeast reactors are expected to return from their scheduled outages, the U.S. Nuclear Regulatory Commission told Reuters this week.
Oil prices rose too, as the higher natural gas prices threatened to force utility users to switch to oil for burning.
June crude on the New York Mercantile Exchange settled up 82 cents at $26.49 a barrel, nearly $1.50 above last week's five-month low.
"It's definitely helping to support crude," said Kyle Cooper, oil and natural gas analyst with Citigroup. "Clearly those nuclear issues remain price-supportive for fossil fuels."
Industry inspectors have been aware of cracking around some reactor vessel head nozzles several years ago, but the problem took on added urgency in 2002 when FirstEnergy Corp. (FE.N) found that its Davis-Besse reactor in Ohio had a leak that went through the vessel head, eating a hole through six-inch metal.
Another large nuclear unit in Texas, owned by Texas Genco Holdings Inc. (TGN.N), may also be closed until late summer, months past its original return date, the company said last month.
Nuclear capacity was 4 percent below where it was a year ago, Cooper said.
The U.S. Energy Information Administration storage data released last Thursday showed U.S. gas storage stood at 54 percent below last year and 43 percent below the five-year average.
The loss of 1,000 megawatts of electrical generation requires roughly 200 million cubic feet a day of natural gas to replace it, according to Cooper.
For some locations the replacement power would come from oil-fired generators burning distillate fuel or residual fuel oil.
Increased demand for distillate fuel could prevent the U.S. from replenishing depleted inventories of heating fuel for next winter.
After one of the coldest winters in recent years, the EIA said in a recent report that U.S. heating fuel inventories, including heating oil (high-sulfur distillate fuel) and propane, "plunged to near historical low levels at the end of March".
Preliminary March data show heating oil inventories ended the 2002-03 heating season at an estimated 36.6 million barrels, a near-record low for March, while at the same time inventories of propane fell to an estimated 19.5 million barrels, the lowest March level in more than 30 years.