Wintry blast promises only short-lived boost for Northeast gas market

Spot natural gas prices across the US Northeast spiked in Dec. 11 trading ahead of colder weather and an expected ramp in heating demand but the rally is likely to be short-lived as milder temperatures loom.

During the morning session, cash prices at Boston's Algonquin city-gates hub were moving just below $12/MMBtu, up from a prior-day settlement at $3.37. At the US border with Canada, prices at Iroquois Zone 2 jumped to over $7 compared with a market closing level at $3 on Dec. 10. In the New York City metro area, prices at Transco Zone 6 NY were trading around $4.08, compared with a prior settlement at just $2.77, data from Intercontinental Exchange and S&P Global Commodity Insights showed.

The spike in Northeast spot gas prices comes just ahead of freezing weather from Dec. 12-14.

Forecast

Beginning Dec. 12, overnight lows in Boston will dip to just 25 degrees Fahrenheit with similar low temperatures expected in New York City. Farther inland, though, in Buffalo, daily lows will deep into the upper teens from Dec. 12-13 with a chance for snow, according to a Dec. 11 forecast published by AccuWeather.

According to a regional weather and demand forecast published by Commodity Insights, the Northeast population-weighted temperature will drop to an average 33 degrees from Dec. 12-14. Over the same three-day period, residential-commercial gas demand will average about 16.1 Bcf/d and reach a single-day peak Dec. 13 at nearly 16.9 Bcf/d – about 2.5 Bcf/d, or more than 18%, above average.

Beyond mid-December, though, Northeast gas-fired heating demand is expected to fall sharply, averaging just 12.9 Bcf/d in the week from Dec. 15-21. According to a three-to four-week outlook published by the US National Weather Service, temperatures across the Northeast should trend near normal for most of late December, potentially pressuring regional gas demand and prices.

As the outlook for gas-fired heating demand ebbs, forwards traders are already pricing in a muted Northeast gas market over the balance of December.

At Algonquin city-gates, the balance-of-month market has pulled back to around $6.60 in recent trading, which is down from over $9 in late November and roughly flat to early December pricing. At Iroquois Zone 2, the balmo contract is now trading around $5.85 – also flat to early December but down from highs around $8.50 late last month. At Transco Zone 6 NY, balmo prices have creeped up about 20 cents from early December to around $3.40 but are still down from a high at $4.30 in late November, Platts M2MS forward gas data showed. Platts is part of S&P Global Commodity Insights.