New England gas, power spot prices plunge on high demand as gas supply floods in

Spot gas and power prices in New England dropped Dec. 20, despite a forecast for sustained elevated demand through Dec. 24, as more gas flows into the Northeast from Canada and less flows out of the region.

New England gas demand benchmark Algonquin city-gates saw its largest day-on-day increase and highest price since January 2018 Dec. 17, when the spot price leaped $24.20 on the day to $28.06/MMBtu for Dec. 18-20 flows. The location plummeted $20.945 Dec. 20 in morning trading to $7.635/MMBtu for next-day flows, preliminary Platts settlement data showed.

In power pricing, Mass Hub day-ahead on-peak for next-day delivery tumbled more than $100 Dec. 20 on the Intercontinental Exchange to price around $90/MWh. With this change, the contract normalized from its highest price in nearly four years, Platts pricing data showed.

Recent volatility in regional gas and power pricing has largely been driven by wide swings in temperatures. The average Northeast temperature dropped to 32 degrees Fahrenheit Dec. 20 from 52 F Dec. 17, and a winter weather advisory was issued for Vermont and New Hampshire Dec. 18-20. This temperature drop followed a stretch of substantially above-average temperatures Dec. 10-17.

The recent cold weather is forecast to continue through Dec. 24, with CustomWeather forecasting the average temperature to remain in the 30s F, keeping gas and power demand robust.

ISO New England peakload demand was forecast to remain above 17 GW over the next three days (Dec. 21-23), with demand easing below 17 GW Dec. 24.

Platts Analytics forecast that total Northeast demand could reach 30 Bcf/d by the end of the week for the first time this winter, 5 Bcf/d higher than Dec. 18-20's elevated demand.

More supply amid high demand

The Dec. 20 price drop represents a shift away from the recent temperature-driven price fluctuations, as the dramatically higher prices attracted more supply into the region.

Inflows into the Northeast ramped up 950 MMcf from Dec. 17 to Dec. 20, reaching an eight-day high of 2.9 Bcf Dec. 20, according to S&P Global Platts Analytics data. The bulk of the higher inflows came from Canada, which doubled over this time to 1.36 Bcf Dec. 20.

Along with higher inflows into the Northeast, Platts Analytics data shows that total outflows dropped by around 500 MMcf/d, effectively keeping more gas in the region.

Northeast gas production increased throughout the weekend as well, potentially aided by the approved in-service of Transcontinental Gas Pipe Line's Leidy South expansion by the US Federal Energy Regulatory Commission Dec. 17. Transco's letter requesting approval indicated that the remaining stage of the project, the Hilltop Loop, could be fully placed in-service as soon as Dec. 18, according to the company's Dec. 17 filing.

Platts Analytics data shows Northeast gas production rose around 260 MMcf/d to 34.9 Bcf Dec. 20.

Outlook

Despite Dec. 20's price drop, longer-duration packages show lingering higher prices, suggesting more volatility may be in store.

Mass Hub's balance of the week contract for Dec. 22-24 delivery remained relatively elevated on ICE Dec. 20, pricing in the mid-$140s/MWh, compared with its previous settlement of $153/MWh.

The Algonquin city-gates remainder of winter strip average (January-March 2022) climbed about $8 from the start of the month to $22.93/MMbtu Dec. 20, the latest Platts Analytics M2MS data showed.