Natural gas production and demand hit new records in 2013, and futures prices suggest the trend may continue this year, FERC staff said last week in their annual State of the Markets review.

Natural gas spot prices, which had fallen to record lows in 2012, rose across the U.S. last year, encouraging shale gas production and pushing wholesale power prices higher.

Most trading hubs saw gas prices increase 30 to 40%, with the biggest increases in the Northeast, where prices occasionally hit $20 to $30 per MMBtu.

Gas demand increased 2.3% in 2013 to a record 70 Bcfd. Residential and commercial demand was up 16%, largely due to colder than normal weather in the first quarter of the year. Industrial demand increased 1.8% due to growth from mining, manufacturing and petrochemicals.

Demand from electric generation dropped 10% as the rise in gas prices reduced the fuel’s competitiveness. As a result, coal saw a 5% increase in electric generation demand.

Gas prices would have risen further but for an increase in supply. Total U.S. supply, including production and imports, averaged 68 Bcfd, up 1.0%. Production from the Marcellus Shale rose 44%.

The increase in production helped push long-term natural gas futures prices lower, leading industry to continue its investments in gas-fueled manufacturing. More than 90 new gas-consuming industrial projects or expansions began operations in 2013 and almost 220 are expected in 2014.

Power Prices up Despite Drop in Demand

Despite a 0.1% decline in power demand nationally, electricity spot prices rose across the country.

The largest increases were in the Northeast, with higher natural gas costs driving prices at the Mass Hub up 54%, and in the West, where prices at Mid-Columbia rose 66% due to reduced hydroelectric production.

Financial trading volumes for natural gas fell on the Intercontinental Exchange (ICE), while trading volumes for electricity rose.

Electric financial trading volumes on ICE rose 19%, with trades with durations of two months to one year up 44%.

FERC attributed the increase to the Dodd-Frank Act. In October 2012, ICE converted cleared energy swaps to futures to address Dodd-Frank regulations to increase transparency. As a result, many transactions previously conducted bilaterally have moved to exchanges, FERC said.

About 92% of the financial trading for electricity products outside ERCOT took place at RTOs, up from 90% in 2012. PJM trades continued to dominate, accounting for 68% of electricity trading on ICE, up from 63% a year earlier.

Natural gas saw declines in both financial and physical trading volumes, with ICE reporting a 14% decline in financial volumes and physical trading dropping 30%. FERC attributed the drop to “relatively stable” gas prices in 2013, which reduced traders’ profits.