Wintry blast offers fleeting boost to Northeast gas demand, prices

New York — Frigid temperatures forecast to hit the US Northeast later this week are promising to dial up heating demand from homes and businesses, potentially lifting regional gas prices from their sub-$2 slumber.

Beginning Friday, the colder weather will sweep across the upper-Atlantic seaboard, dropping temperatures in New York and New England to the mid-teens and single digits, respectively.

The National Weather Service has forecast temperatures to begin warming Saturday with the artic weather system expected to exit the region by early Sunday morning.

Although short lived, the blast of colder weather is forecast to lift total gas demand in the Northeast to 33.9 Bcf/d Friday and 35.5 Bcf/d by Saturday, S&P Global Platts Analytics data shows. Over the past 30 days, demand there has averaged about 27.1 Bcf/d.

On Wednesday, cash prices at the Transco Zone 6 New York hub were trading nearly flat from the prior settlement at $1.82/MMBtu. Farther north, though, at Boston's Algonquin city-gates hub, prices were up about 55 cents on the day to over $2.50/MMBtu, preliminary data from S&P Global Platts showed.

Prices at Transco New York, Algonquin and other neighboring demand hubs in the Northeast could be expected to continue strengthening Thursday as traders jockey for available gas supply in the region.

In mid-January, a similar cold-weather spell in the Northeast boosted gas demand there to over 35 Bcf/d, lifting Transco prices to the mid-$3s/MMBtu and Algonquin prices to over $7/MMBtu.

Operational Flow Orders

On Tuesday, two of the region's major pipeline operators – Texas Eastern Transmission and Algonquin Gas Transmission – issued low-system-pressure operational flow orders in an effort to ensure sufficient supply and deliverability during the upcoming colder weather.

Effective 9 am February 13, shippers on both pipelines will be required to more tightly monitor and balance nominated and delivered volumes of gas. Deliveries exceeding 102%, or 2,000 Dt, of scheduled quantities will face a per-dekatherm penalty equal to three times the daily Platts Gas Daily posting for the "high common price" in the applicable geographical region.

Demand, supply, prices

The forecast jump in Northeast heating this week will give the region's gas industry a short, but much needed, boost that comes amid a disappointing demand season so far this winter.

From November 1 to date, Northeast regional heating has underperformed relative to both the 2018-19 winter season and the prior five-year average – about 1.5 Bcf/d and 800 MMcf/d, respectively – Platts Analytics data shows.

Weaker gas demand this winter, though, seems to have only added to the region's supply length.

Over the past 12 months, Appalachian gas production has grown by about 8%, or 2.5 Bcf/d. While regional shippers are pushing ever more gas to the neighboring Southeast and Midwest regions, implied Northeast storage inventories currently remain at over 620 Bcf, or their highest mid-February level since 2016.

An oversupplied market in the Northeast has left gas prices in the region severely depressed this winter. At Algonquin city-gates and Transco Zone 6 New York, winter-to-date cash prices have averaged just $3.43/MMBtu and $2.38/MMBtu, respectively – their lowest in four years or more, S&P Global Platts data shows.