US Northeast, Appalachia spot gas prices weaken as fundamentals loosen

Spot gas prices across the US Northeast and Appalachia were trading sharply lower Feb. 7, a dynamic that could continue into the second week of February, as stronger regional gas production and higher temperature forecasts loosen supply and demand fundamentals.

Daily losses in the US Northeast were in the $5-$10 range Feb. 7 for next-day flows. Transco, Zone 6, N.Y. plunged $8.355/MMBtu to $5.145/MMBtu, while the Algonquin city-gates fell $9.35 to $11.985/MMBtu, Platts preliminary settlement data shows. Northeast spot prices have seen considerable volatility year-to-date, with large daily price movements more common so far in 2022 than observed in recent years.

Appalachia spot gas prices also fell dramatically, albeit on a smaller scale, down 90 cents-$2.20 Feb. 7. Preliminary Platts settlement data shows that Eastern Gas, South, dropped 98.50 cents to $4.00/MMBtu, while Columbia Gas, Appalachia fell $1.035 to $3.97/MMBtu.

Supply and demand

After falling to 11 degrees Fahrenheit below normal Feb. 5 and 9 F below normal Feb. 6, the average regional temperature was forecast to return to seasonally normal Feb. 8 and climb above normal Feb. 9-10, CustomWeather data showed.

Higher temperature forecasts are expected to reduce both residential-commercial and gas-fired power demand over the next several days. Platts Analytics projected that res-comm gas demand will fall steadily to 14.76 Bcf Feb. 10, down nearly 6 Bcf/d from averaging 20.66 Bcf/d Feb. 5-6. Gas-fired power demand was expected to fall to 8.08 Bcf Feb. 10, from 8.28 Bcf/d Feb. 5-6.

Turning to supply, gas production in the Appalachia Basin has begun to rebound after falling to average 30.7 Bcf/d Feb. 4-5, Platts Analytics data showed. By Feb. 7, production had risen nearly 1 Bcf/d to 31.65 Bcf.

Dry gas production in Ohio saw the largest recovery so far in the region, reaching 3.4 Bcf Feb. 7, up 440 MMcf, or 15%, from averaging 2.96 Bcf Feb. 4-5. Dry gas production in southern Pennsylvania and wet gas production in the southwestern part of the state have also rebounded, increasing 170 MMcf and 150 MMcf, respectively, from Feb. 4-5.

Outlook

When temperatures in the Northeast last climbed to above-normal ranges Feb. 1-2, regional gas demand and spot prices fell similarly, suggesting that the warmer weather ahead might lead to a near-term continuation of the current lower price environment.

Additional supply could deepen that dynamic.

Appalachia gas production remains well below the 32.5 Bcf/d averaged in the seven days prior to the winter storm, indicating that the warmer weather could bring another 800 MMcf/d of production back into the market relatively quickly.

Looking further ahead, the National Weather Service's most recent 30-day outlook for February shows a likelihood of above-average temperatures for the entire Eastern Seaboard.

Eastern Gas, South's balance-of-the-month contract fell 43 cents to trade at $3.95/MMBtu on Intercontinental Exchange as of 12 pm ET Feb. 7.