US spot gas prices slide on lower demand, increased Canadian inflows

Houston — Spot gas prices across the US saw weakness as cold fronts in several regions have rolled off, decreasing demand, while increased Canadian inflows added further pressure on demand levels.

Midwest gas falls amid lower demand

Midcontinent natural gas cash prices decreased in the week ending Jan. 20, as demand moved lower with mild temperatures and Canada inflows reaching their highest level since 2009.

The cash price for Natural Gas Pipeline-Nipsco and NGPL-Midcontinent Pool ended the week Jan. 20 at $2.37/MMBtu and $2.33/MMBtu respectively, 21 cents lower than levels two weeks ago.

Toward the start of the week, prices were relatively unchanged before falling about 20 cents on the day Jan. 19 and continuing the downward trend Jan. 20, as the month-to-date average for demand moved 2.25 Bcf below 2020 and 12% below the three-year average, according to S&P Global Platts Analytics.

Temperatures are expected to remain normal to slightly above normal over the next 8-14 days, according to the National Weather Service forecast, which could keep demand stable over the next few weeks.

Production in the Midcontinent Producing region has fallen 1.3 Bcf/d year on year to 6.4 Bcf/d, as the year-to-date average across the Midcontinent sits 10% behind 2020. This drop in production has lowered flows from the producing region to the Midcon Market by 1.4 Bcf/d to 2.5 Bcf/d on the year, its lowest winter-to-date average in the past 16 years, according to Platts Analytics.

However, Canada inflows have helped offset this drop as inflows to the Midwest on Great Lakes are at their highest point since 2009, with its average this January operating 42% above January 2020, Platts Analytics data showed.

Northeast cash gas falls on Canadian inflows

Algonquin city-gates had a significant decline of $1.26 to settle at $3.04/MMBtu for Jan. 21 flows, while Iroquois Zone 2 dropped 53 cents to settle at $3.32/MMBtu.

Warmer temperatures have brought lower demand in the Northeast region after a mild cold spike rolled off.

Total Northeast demand was forecast by S&P Global Platts Analytics to decline nearly 2 Bcf/d to 29.9 Bcf/d Jan. 21, with the bulk of the demand decline expected to come from res-comm demand.

According to Platts Analytics, Northeast temperatures are expected to sit above average over the next few days, which is expected to add pressure to heating demand in the region.

With demand expected to fall on Jan. 21, net flows have been mostly down in the Northeast region.

Net flows to the Midcon Market and Southeast were down 4% and 8%, respectively on Jan. 20, which is expected to be another factor weighing on Northeast spot gas prices.

In addition, Canadian inflows were up 8% on Jan. 20 at 1.8 Bcf/d, which may be oversaturating the Northeast market with gas as total demand is expected to continue to fall through the rest of the week.

Northwest gas impacted by strong hydropower

Spot gas prices in the US Northwest continue to be dampened by strong Canadian inflows and robust hydropower generation.

Cash Sumas has averaged an 8.50-cent discount to cash Henry Hub so far this January. In contrast, Sumas averaged a 57-cent premium to Henry Hub for the same time last year.

Hydropower generation in the Bonneville Power Administration (BPA) footprint has averaged 81.6% of the area's total generation over the last two weeks (Jan. 6-19) of available data at the time of publication. That is substantially higher than hydropower's 73.5% of total BPA generation averaged for Jan. 6-19, 2020. The increase in hydropower has reduced demand for thermal power generation.

Strong inflows from western Canada have also affected the region's supply-demand imbalance. Platts Analytics data shows that month-to-date inflows from Canada into the US West have averaged around 330 MMcf/d, or 10% higher this January than last.

East Texas, Southeast gas spot slide

Southeast natural gas prices came off across all major indexes the week of Jan. 18 after a brief cold snap related spike.

The cash price for Henry Hub fell to $2.42/MMBtu for flows Jan. 21, after averaging about $2.73/MMBtu Jan.7-20, while Houston Ship Channel slid to $2.45, after averaging $2.58/MMBtu during the same period.

The weakening in prices are a result of rising temperatures as the cold front recedes with total Southeast and Texas demand set to decline 1 Bcf on the day to 37.6 Bcf on Jan. 21, according to Platts Analytics. This level is about 4.2 Bcf lower than the prior seven-day average.

The Henry Hub balance-of-the-month contract dropped to $2.47/MMBtu on Jan. 20 after settlements averaging $2.73/MMBtu over the past two weeks.

On the production side, Haynesville production in January so far has averaged 12.3 Bcf/d, up 280 MMcf on the month, and may end the month with the highest monthly average for the basin since the May output average of 12.5 Bcf/d.