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Research & Insights
11 Jan 2022 | 22:39 UTC
By Kelsey Hallahan and Savannah Bush
Highlights
US Northeast-to-Southeast flows down 670 MMcf/d month to date
Texas-to-Southeast flows up 520 MMcf/d month to date
With the US Northeast keeping more gas in-region to meet elevated winter demand, slashing net flows to the Southeast, the impact to Southeast spot gas prices has been softened by a dramatic increase in flows from Texas.
Successive cold snaps have pushed the average Northeast temperature into the 20s and low 30s Fahrenheit over the last 10 days, pushing regional gas demand up more than 15 Bcf/d, or 57%, from the start of the month to reach 35.4 Bcf Jan. 11.
The steep increase in regional gas demand, as well as surging demand in the Midwest, has left less Northeast gas available to flow south, data from S&P Global Platts Analytics showed.
Northeast-to-Southeast net flows fell 670 MMcf/d, or 11%, so far this January, to 5.19 Bcf/d month to date, down from averaging 5.86 Bcf/d in December 2021.
The drop in Northeast-to-Southeast inflows has occurred at a time of heightened demand in the Southeast, with residential-commercial gas demand up 1.8 Bcf/d so far this month from December levels and gas-fired generation demand up 670 MMcf/d.
However, the pricing impact to Southeast spot gas prices has been relatively minor.
Month to date, cash Henry Hub rose 11 cents above its December average to $3.83/MMBtu. Similarly, the cash price for Transco, Zone 4, rose 17 cents above the previous month's average to $3.89/MMBtu.
Cash prices remain well below the highs in the $5-$6/MMBtu range observed in September through November 2021.
A dramatic increase in inflows from Texas has likely blunted the double impact on prices of higher demand and lower inflows from the Northeast.
Net flows into the Southeast from Texas have averaged 6.71 Bcf/d Jan. 1-11, up 520 MMcf/d from averaging 6.19 Bcf/d in December, according to Platts Analytics flow data.
The bulk of the increase has come from Northeast Texas, which saw a 25% increase in net outflows to the Southeast since December, averaging 4.32 Bcf/d month to date.
Texas is well positioned to flow more gas to the Southeast, with greater-than-ever eastbound takeaway capacity out of the prolific Permian basin, ongoing pipeline constraints limiting westbound flows out of Texas, and robust gas production.
A trio of new intrastate pipelines designed to bring gas from the Permian to East Texas have entered commercial service since September 2020, adding just over 6 Bcf/d of eastbound capacity. The most recent, Whistler Pipeline, came online in July 2021.
While flows on intrastate pipelines are more opaque than interstate pipelines, eastbound utilization is likely robust due to constraints limiting the amount of Permian gas able to flow to Southwest markets.
Ongoing repair work on the El Paso Natural Gas pipeline system's Line 2000 has reduced operating pressure on the entire Line 2000 system to the point of removing this system from service from Black River compressor station to the California border.
Platts Analytics flow data showed that net outflows from Texas to the Southwest this January have come in at half the volume seen last year, averaging 672 MMcf/d month to date versus 1.24 Bcf/d Jan. 1-11, 2021.
Permian dynamics aside, East Texas has seen its Haynesville production grow this year. Month-to-date production has averaged 3.68 Bcf/d, up 431 MMcf/d, or 13%, from year-ago levels.
Rig count in the Haynesville has recently reached 65, a level not seen since March 2019.
Temperatures in the Northeast are forecast to remain below-average for the next two weeks, which could continue to limit Northeast-to-Southeast flows.
With the average temperature in Texas forecast to be above-average in the near-term, the elevated Texas-to-Southeast flows -- and steady Southeast spot gas prices -- are likely to continue.