Cold temps boost Northeast spot gas prices as winter forwards rally loses steam

Spot gas prices in the US Northeast could hit their highest since last winter this week as sharply colder weather entered the region Nov. 2, accompanied by a chilly forecast for the remainder of the week.

In early trading, cash prices at New York metro-area hubs, Texas Eastern M3 and Transco Zone 6 NY, were up nearly 30 cents to $5.22 and $5.27/MMBtu, respectively. At Boston's Algonquin city-gates hub, prices were up about 50 cents to $5.72/MMBtu, data from the Intercontinental Exchange showed.

The precipitous rise in prices came as the Northeast population-weighted temperatures dropped 9 degrees on the day to a chilly 47 Fahrenheit Nov. 2, stoking a surge in heating. Initial estimates showed Northeast residential-commercial gas demand at 9.9 Bcf/d, with current forecasts from S&P Global Platts Analytics predicting a steady rise to over 10.8 Bcf/d by later this week.

Along with anticipated gains in power burn and industrial demand, the Northeast is poised to see its highest overall demand this week since last winter, potentially fueling a continued rise in gas prices.

Forwards

As the Northeast cash markets rises toward levels unseen since last winter, forwards prices have begun moving in the opposite direction, reflecting a recent easing in the market's seasonal price outlook.

At the Texas Eastern M3 and Transco Zone 6 NY hubs, forwards prices for the peak-demand month of January have fallen about $2.30 from their early October highs, settling Nov. 1 at $9.42 and $10.69, respectively. At Algonquin city-gates, January forwards are down by nearly $8 over the same period to $17.50/MMBtu on Nov. 1, S&P Global Platts' most recently published M2MS forwards data shows.

The cooling rally in Northeast winter gas markets comes amid a slow start to the winter heating season and a recent, precipitous rise in regional gas storage levels.

Over the past 30 days, residential-commercial gas demand in the Northeast has averaged just 4.7 Bcf/d-1.3 Bcf/d, or almost 22%, below the prior five-year average, Platts Analytics data shows. On Nov. 2, heating demand surpassed the historical average for the first time this season where it's forecast to remain through the end of this week

Cooling enthusiasm in the forward gas market has been reinforced by easing concern over Northeast inventory levels. Over the past six weeks, an accelerating pace to storage injections has eliminated this season's long-lingering storage shortfall, closing the gap from a more-than-50 Bcf deficit as recently as mid-September.