US Rockies spot gas prices rise to fresh highs on increased competition for gas

Spot gas prices in the Rockies climbed to their highest level since the mid-February Arctic air event, as a combination of lower production, above-average temperatures and reduced pipeline capacity heated up competition for Rockies gas.

Cash CIG, Rockies was trading 21 cents higher at $4.095/MMBtu Aug. 27 in a fourth day of consecutive upward movement, according to preliminary settlement data. This will be the location's highest price since Feb. 18 if it holds to final settlement.

Similarly, cash Northwest, Wyoming pool gained 11.50 cents in Aug. 27 to reach $4.24/MMBtu, continuing a streak that has boosted the location more than 70 cents since Aug. 20.

Total gas production in the Rockies fell over the past week, according to Platts Analytics modeled data. Regional production averaged 8.28 Bcf/d for the most recent seven days (Aug. 21-27), down from 8.36 Bcf/d for the seven days prior (Aug. 14-20).

Platts Analytics data shows that the overall decrease can be almost entirely attributed to a sharp drop in production in the Green River-Overthrust zone, likely caused by an assortment of pipeline repair and maintenance projects that reduced takeaway capacity out of the basin.

A mechanical failure at Bridger Compressor Station caused Enterprise Jonah Gas Gathering to declare a force majeure Aug. 26, reducing flows onto Kern River Transmission at Pioneer to 183 MMcf/d the past seven days from 408 MMcf/d the previous seven. This, in turn, helped decrease flows past Muddy Creek Compressor Station in Wyoming 200 MMcf/d to average 1.8 Bcf/d for the last seven days.

Dominion Energy's Overthrust Pipeline also experienced interrupted flow capacity over the last week, with pipeline nomination data showing Overthrust's flows onto Kern River at Roberson Creek slashed to zero for Aug. 24-26, down from 237 MMcf/d the prior seven days. Planned piping modifications on Overthrust were likely responsible, according to the pipeline system's maintenance schedule.

Competition

At the same time that Rockies gas faced lower takeaway capacity, maintenance and repair projects in the Southwest and Northwest have increased both regions' reliance on Rockies supply.

In the Southwest, pipeline restrictions on the El Paso Natural Gas pipeline system and the SoCalGas system have constrained the amount of gas able to flow west into Southern California from the Permian.

El Paso Natural Gas issued a force majeure Aug. 15 on Cimarron Compressor Station that reduced westbound flows along Line 2000 until further notice. Platts Analytics data shows that deliveries to the SoCalGas system from EPNG in the second half of the month have averaged 220 MMcf/d lower than the first half.

SoCalGas has its own ongoing maintenance work that limit inflows from the Permian Basin, including work on Newberry Compressor Station that has effectively cut flows through Topock -- a key interconnect with El Paso Natural Gas and Transwestern -- to zero since July 25, according to pipeline nomination data.

In the Pacific Northwest, planned maintenance work on Gas Transmission Northwest restricted inflows of gas into the Pacific Northwest from Canada this week, with flow past Kingsgate at the US-Canada border down by around 220 MMcf/d to 2.18 Bcf/d for Aug. 24-27. Platts Analytics data shows that Rockies-to-Northwest flows nearly doubled over the last week, from around 550 MMcf Aug. 21 to 912 MMcf/d Aug. 27.

Adding a third source of competition for Rockies supply, above-average temperatures in the Rockies could boost local demand, with the National Weather Service forecasting Denver to see highs in the upper 80s to low 90s Fahrenheit through the end of the month.

Outlook

All of the maintenance work limiting Rockies outflows are set to finish by Aug. 27, which could bring 200-300 MMcf/d of additional production back online by next week, alleviating some of the upward force on spot gas prices.

More Canadian inflows into the Pacific Northwest can also be expected, reducing the call on Rockies supply. GTN's Flow Past Kingsgate restrictions were set to increase to 2.18 Bcf/d Aug. 28.

The restrictions limiting Permian-to-Southwest flows, however, are currently scheduled to run through the end of September, if not longer, which could keep a floor under Rockies spot prices over the next month even if temperatures cool.