ANALYSIS: Northeast gas prices persist at record lows as mild weather pressures demand

New York — Spot natural gas prices at key hubs in the US Northeast are trading at historic lows this November as exceptionally mild weather across the region continues to pressure prices and production.

At Algonquin city-gates, cash prices this month to date have averaged $2.06; at Transco Zone 6, New York, the spot price is averaging just $1.48/MMBtu. At both locations, gas prices this November are at their lowest in 10 years or more, data from S&P Global Platts shows.

Record-low prices in the Northeast market area have accompanied the region's mildest November weather since 2015. Month to date, population-weighted temperatures have averaged nearly 51 degrees Fahrenheit, or more than 3 degrees above average, S&P Global Platts Analytics data shows.

On Nov. 25, another mild weather forecast put renewed pressure on the Northeast spot gas market. At Algonquin city-gates, cash prices were down more than 50 cents to $1.44; at Transco Zone 6 New York, the market fell 27 cents, also ending trade at $1.44/MMBtu, S&P Global Platts data showed.

Through the Thanksgiving Holiday weekend, population-adjusted temperatures in the Northeast are forecast to average nearly 7 degrees above normal. Over the same four-day period, gas demand in the region should decline to 19.9 Bcf/d – down nearly 9% from the prior-week average at 21.8 Bcf/d.

Production

In addition to pressuring gas prices, it's possible that milder weather through the end of November could push Appalachian production lower this weekend as operators respond to weaker demand.

This autumn season, Northeast producers appear to be making almost daily adjustments to production based on weather, demand and prices. Throughout September, October and November, those variables appeared to reliably predict production levels, with output hitting successive annual lows and record highs – sometimes within a matter of days – in response to price volatility.

On Nov. 25, Appalachian production was estimated at 33.6 Bcf/d, down just 100 MMcf compared to the prior-week average, Platts Analytics data showed.

Outlook

While this November's mild weather and high storage levels have pushed Northeast gas prices to historic lows, the forward market appears confident that colder weather and higher prices will prevail this winter.

On Nov. 24, Algonquin city-gates calendar-month prices for December, January and February were assessed at $3.63, $5.50 and $5.40/MMBtu, respectively. At Transco Zone 6 New York, the same three-month strip is currently priced at $2.53, $4.65 and $4.63/MMBtu, respectively, M2MS data shows.

According to a recent forecast from the US National Weather Service, though, there could be more downside risk ahead for gas prices. From December to February, the agency is forecasting a 33% to 40% chance for above-average temperatures in the Northeast, an outlook published Nov. 19 showed.