Regional US inventories have been strengthening, with the deficit narrowing to the five-year average as US gas demand has remained muted with above-average temperatures across the country, in addition to dry production remaining resilient after rebounding from the winter storm freeze-offs seen just a few weeks ago.
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Midwest and Midcontinent
Total Midcontinent demand has been trending lower year on year with warmer temperatures. Demand so far this March has averaged 17.03 Bcf/d, 16% below last year, while temperatures have averaged 7 degrees above normal, according to S&P Global Platts Analytics. Both power and residential demand have seen declines year on year with power falling 1.3 Bcf/d and heating 1.9 Bcf/d, currently sitting about 2 Bcf/d below the three-year average.
Adding to this bearish sentiment, SCOOP/STACK production has fully recovered from freeze-offs in February and has exceeded pre-cold snap output. Before the winter storm SCOOP/STACK production was 3.6 Bcf/d before dropping to a three-year low then recovering to its current average of 3.7 Bcf/d, Platts Analytics recorded. Modeled production in the Midcon Producing has increased above January and February averages, sitting at 8.57 Bcf/d and 3% above the five-year average.
Storage in the Midcon Producing moved below last year levels last month but has since flipped to a surplus with stronger production and weaker demand. Midcon Producing storage has reached 142 Bcf as of March 24, about 20 Bcf above levels at this time last year and 7% above the five-year average, Platts Analytics data showed. However, Upper Midwest storage sits at a 46 Bcf deficit to last year while remaining 17% above the five-year average.
Spot prices in the Midcontinent have lowered since the beginning of March as Chicago city-gates moved down 17.5 cents to $2.47/MMBtu in March 23 trading. Natural Gas Pipeline-Midcontinent Pool also fell 26 cents over the same period to $2.26/MMBtu.
Total residential-commercial demand in the Northeast has seen significant declines as temperatures are expected to sit roughly 14 degrees F above average over the next few days, with heating demand falling to 6 Bcf/d March 25, down by more than 50% from one week prior.
While total gas demand remains muted in the Northeast, dry gas production has jumped above 33 Bcf/d this week, adding additional pressure to gas prices in the region.
Algonquin city-gates was trading 24 cents lower in ICE preliminary trading on March 24 to $1.91/MMBtu, the lowest level seen this year-to-date.
According to S&P Global Platts Analytics, Northeast demand is forecast to stay below 20 Bcf/d through the balance of March, averaging 18.3 Bcf/d, roughly 6.5 Bcf/d weaker than average demand observed this month, which should help slow withdrawals from depleted inventories in the final days of the withdrawal season.
Dominion inventories are currently at a 200 MMcf/d surplus to the five-year average while Columbia Gas inventories sit at a 14 Bcf deficit to the five-year average.
Texas and Southeast
Power demand for Texas and the Southeast has averaged 11.05 Bcf/d so far this month. This level was nearly 2.25 Bcf lower than what power demand was at this time last year, according to Platts Analytics. Power demand has averaged 12.46 Bcf/d year-to-date, 8% lower than what demand averaged in 2020.
Also adding downward pressure to gas demand, wind generation has averaged nearly 40% of the supply stack in ERCOT this month, 11% higher than levels that the market saw in February, according to Platts Analytics.
The cash price for Houston Ship Channel increased 1 cent on the day at $2.39/MMBtu. This level was 3 cents lower than what HSC has averaged so far this month.
As the region has faced lower demand, total Southeast and Texas storage inventories have grown nearly 40 Bcf this month, pushing over 580 Bcf to start the week of March 22, according to Platts Analytics.
At current levels, inventories are 130 Bcf lower year on year but only 65 Bcf below the five-year average, considerably closing the 144 Bcf deficit to the five-year seen in mid-February, according to Platts Analytics.
The storage surplus in the Mountain region has increased from 3.5% for the week ended March 5 to 6.5% for the week ended March 12. Gas production in the Rockies recovered quickly from mid-February levels, even as regional gas demand trails year-ago levels.
In contrast to the other regions, the Pacific region's storage surplus to the five-year average has shrank further over the last several weeks, falling to a year-to-date low of 7% for the week ended March 12 from 9.9% for the week ended Feb. 26. The continued storage depletion can partly be explained by weaker hydropower generation in the Northwest, which has created room for additional gas-fired power generation, according to data published by the Bonneville Power Administration, or BPA. Hydropower generation in the BPA footprint has averaged 174 MWh/d for March, substantially lower than the 218 MWh/d averaged in February and 239 MWh/d averaged in January.