GIA contracts mixed on easing storage concerns, rising winter demand

The Platts ICE Gas Indices Americas North America contract averaged $5.36/MMBtu for the last four days (Nov. 1-4), down 8 cents from the prior week's average amid rising storage levels and increased demand across the Northeast.

The GIA West contract posted the largest decline of the regions, down 23 cents week over week to average $5.86/MMBtu as capacity restrictions ease. Westbound flows from the Permian Basin on El Paso Natural Gas rose sharply over the past several days, signaling a potential easing of capacity restrictions linked to ongoing repair work on its Line 2000.

On Nov. 3, transmissions on El Paso's westbound mainline climbed to an estimated 2.28 Bcf/d, hitting the highest level since Aug. 15 when a segment of its Line 2000 suffered a failure, triggering the ongoing force majeure. On Nov. 4, westbound flows on the pipe were down modestly to about 2.19 Bcf/d, data compiled by S&P Global Platts Analytics showed. The increase supply in the region added bearish pricing pressure.

The GIA South contract moved similarly, down 18 cents week on week averaging $5.32/MMBtu on lower demand and rising storage; according to the US Energy Information Administration, storage injections in the week ended Oct. 29 surpassed both 2020 and five-year injections averages, bringing total inventories to nearly 930 Bcf. Current levels are in line with historic averages but hold a 100 Bcf deficit to 2020 levels at the same time last year, said EIA.

Storage concerns in the region peaked in early July when storage reached the widest deficit to the five-year average of 70 Bcf, but were able to build back stock with elevated production and pipeline inflows. Over the full injection period, ranging from March 1 to Oct. 31, injections in the Southcentral region totaled over 280 Bcf, 10 Bcf higher than the five-year average, according to Platts Analytics.

The Northeast contract moved inverse to the other regions, rising 7 cents on the week to $5.07/MMBtu as demand remains strong. A 9-degree drop in population-weighted temperatures to 47 degrees catalyzed a surge in heating demand on Nov. 2. 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.

US residential and commercial demand from November through March 2022 is expected to average 40.9 Bcf/d, or about 900 MMcf/d more than last winter. This is despite last winter featuring the storm that froze Texas in February, raising demand to average 52.5 Bcf/d during the month, according to Platts Analytics.

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.