Algonquin, city-gates spot gas falls to year-to-date low as spring approaches

New England natural gas benchmark Algonquin city-gates dropped to its lowest price so far this year during March 15 trading for next-day flows, as forecast warmer temperatures herald the possible end to a winter heating season that has been defined by waves of successive cold snaps and pricing volatility.

Cash Algonquin city-gates fell 47.50 cents to reach $3.955/MMBtu at the preliminary settlement March 15. March 15 will be the first time this pricing location has fallen below $4/MMBtu since late December 2021 if it holds to the final settlement.

After a relatively mild start to the winter heating season, successive waves of very cold temperatures in January, February, and early March boosted Algonquin city-gates spot gas to sustained heights last seen during the 2014 polar vortex.

In January, cash Algonquin city-gates averaged $20.12/MMBtu, more than quadruple the January 2021's average of $4.79/MMBtu. In February, the New England gas benchmark averaged $12.92/MMBtu, up from $8.38/MMBtu in 2021, which included the mid-February deep freeze. Prices have eased in March, averaging $7.81/MMBtu so far, but are still nearly double the $4.46/MMBtu averaged during the same time in 2021.

Algonquin city-gates frequently traded at the highest premium spreads to cash Henry Hub in January and February, which can be explained in part by the region's limited pipeline infrastructure to source gas from the prolific Marcellus and Utica formations. Instead, the New England states turn to LNG imports and fuel oil, which have both seen multiyear-high prices this winter.

Signs of spring

Forecasts show warmer temperatures in the near term, which could continue to dampen spot gas prices in New England and other parts of the US Northeast.

The National Weather Service forecast that Boston would see daily lows climb firmly out of freezing ranges over March 15-18 and into the 40s F. Highs for Boston were expected to reach the upper 50s F and 60s F.

The average US Northeast temperature was forecast to climb to 52 degrees Fahrenheit March 16 and remain in the mid-to-upper 50s F through March 19, data from S&P Global Commodity Insights and CustomWeather showed. Daily average temperatures in the low 40s F are more typical for mid March in the Northeast.

As of March 15, the New England Independent System Operator projected that peak load in its service area would average around 13.6 GW/d over March 16-20, down from 16 GW/d in the first week of March and around 15 GW/d in the second week of March.

Outlook

CustomWeather's April forecast shows that New England will see above-average temperatures, with the warmer-than-normal temperatures extending down the Eastern Seaboard into the Mid-Atlantic region.

As of 1 pm ET March 15, Algonquin city-gates' April contract was trading at a 9-cent premium to Henry Hub on the Intercontinental Exchange, with May at a 54-cent discount and June at a 60-cent discount.