New England winter gas prices dip on shifting outlook for LNG, heating demand

Winter forwards prices at Algonquin city-gates are down nearly 20% from early October highs, as global LNG prices dip and concerns over seasonal demand in New England's gas market ease.

On Nov. 9, forwards prices for the peak-demand months of January and February 2022 settled at $20.42 and $19.41/MMBtu, respectively, with both contracts now trading roughly $5 below their early October highs, S&P Global Platts' most recently published M2MS forwards data shows.

The steep drop in New England's peak-winter gas prices comes as a rally in global LNG market has cooled recently. After topping $56/MMBtu in early October, the JKM prompt-month import price has remained in the mid-$30s for much of the past month. In November, the contract price has fallen further, settling Nov. 9 at $30.56/MMBtu – still a historical high for the global market.

As LNG import prices ease, so too has the outlook for winter demand in New England.

In its latest seasonal outlook, the US National Weather Service predicted a 40%-50% probability for above-average temperatures along the entire Eastern Seaboard from December to February.

Already this season, residential-commercial gas demand in the US Northeast has underperformed compared to the historical average. Over the past 30 days, heating demand in the region has trended at just 6.2 Bcf/d – about 600 MMcf/d, or roughly 9%, below the prior five-year average, S&P Global Platts Analytics data shows.

LNG imports

On Nov. 9, the 2.9 Bcf Catalunya Spirit was spotted several hundred miles east of New York, en route to the Everett LNG import terminal in Boston, according to data from Platts cFlow trade-flow analytics software.

The LNG tanker will be New England's first imported this heating season and potentially, just one of many.

From November 2020 to March 2021, the Everett terminal imported seven LNG cargoes carrying the LNG equivalent of 20.5 Bcf. From November 2019 to March 2020, the terminal received nine cargoes carrying about 23.5 Bcf equivalent, Platts Analytics data shows.

Perhaps more than in winter seasons past, prices in New England's gas market will be heavily influenced the price of LNG cargoes in the Atlantic Basin, given the region's need to attract supply to meet peak-demand on the coldest days this winter. Last season, modeled gas sendout from Everett averaged nearly 150 MMcf/d in January and almost 220 MMcf/d in February. Single-day highs over the two-month period climbed to as much as 500 MMcf/d.

Price outlook

On the global market, recent supply uncertainty from Malaysia has rattled some importers and utilities in Northeast Asia's import market, lifting prices from recent lows earlier this month.

On Nov. 9, JKM prices for January were assessed in the upper $31/MMBtu range, having rebounded about $6 from a five-week low around $27 on Nov. 2, S&P Global Platts data showed.

While global import prices will undoubtedly influence New England's gas market this winter, a slow heating season could have an equally large impact, allowing prices at Algonquin city-gates to decouple from the global market and potentially drift significantly lower.