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East Coast gas storage risk fuels rally in Northeast winter forwards markets


East region storage deficit widens to 57 Bcf in July

Jan 22 forwards rise at key hubs in Boston, New York

Northeast balances tighten summer over summer

  • Author
  • J Robinson
  • Editor
  • Bill Montgomery
  • Commodity
  • Natural Gas

A widening gas storage deficit in the Eastern US is raising alarm in the Northeast downstream market area, where winter 2021-22 forwards prices are up sharply since the start of injection season.

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On July 8, prior-week storage data released by the US Energy Information Administration showed the smallest build to East Coast inventories since the transitional storage period in late April.

In the week ending July 2, the East Coast gas industry injected just 8 Bcf to inventory, widening the region's storage deficit to the five-year average by 15 Bcf, or 36%. At 521 Bcf, East Region storage is now 57 Bcf below the five-year average and 133 Bcf below its corresponding year-ago level, EIA data shows.

As the East Coast storage deficit continues to grow, forwards markets have already begun bracing for higher winter gas prices at key downstream locations along the Upper Atlantic Seaboard.

At Boston-area hub Algonquin city-gates, the January 2022 forward gas contract settled as high as $12.85/MMBtu earlier this month -- up from the mid-$7s/MMBtu as recently as April. At Transco Zone 6 New York, the January contract has settled as high as $7.65/MMBtu recently, rising from the low-$6s/MMBtu in early April, S&P Global Platts' M2MS forwards data shows.

Trailing inventory levels and rising winter gas prices in the Eastern US come as the region's supply balance faces pressure this summer amid strong power burn demand and relatively flat production.


From June 1 to date, Northeast gas-fired power burn has averaged a record 9.4 Bcf/d, outpacing last summer's prior-record average over that period by about 100 MMcf/d. The new highs for power burn demand come despite significantly stronger gas prices this year, compared with 2020.

Last month, population-weighted temperatures in the Northeast climbed into the 80s Fahrenheit on two separate occasions, making for the hottest June monthly average temperature in over a decade. Short-term forecasts show 80-degree temperatures returning to the Northeast in H2 July, bringing with them the possibility for another record demand month, S&P Global Plats Analytics data shows.

According to a recent monthly forecast from the National Weather Service, the Northeast -- and New England especially -- face an elevated 40% to 50% risk for above-average temperatures in July.


Strong gas demand in the Northeast this summer has stretched Appalachia's production thin, particularly as regional operators continue to send near-record supply volumes to neighboring markets.

Over the past 30 days, output from the Marcellus and Utica shales has averaged about 33.2 Bcf/d -- up about 1.5 Bcf/d compared with the same period in 2020 -- but down modestly compared with the 2020 exit-rate average at 33.8 Bcf/d this past December, Platts Analytics data shows.

With over 40% of Appalachia's supply currently being delivered to markets in the Midwest and the Southeast -- about 14.2 Bcf/d since June 1 -- the Northeast market has been left with less available supply for injection this summer. With the additional pull on Appalachian supply showing no sign of easing, winter gas prices in the Northeast market area could continue to rise.