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Pipeline explosion, force majeure send June futures, Northeast cash gas higher

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Pipeline explosion, force majeure send June futures, Northeast cash gas higher

Junenatural gas futures surged late in the Friday, April 29, trading sessionsettling up 4.8% amid reports of an explosion on Texas Eastern TransmissionLP's 30-inch Texas Eastern pipeline in western Pennsylvania. First pressured bya healthy natural gas supply and milder weather, the news of the blast pushedthe contract to a $2.195/MMBtu high and a settle at $2.178/MMBtu, 10 centshigher on the day.

Theexplosion andsubsequent conflagration reportedly occurred at 8:13 a.m. ET on the TexasEastern pipeline in Salem Township in Westmoreland County, Pa, according to anews release from Spectra EnergyCorp. The fire was extinguished and authorities established aone-quarter-mile evacuation radius from the site of the incident. Thecompany said updated details would be provided when available.

Supplyconcerns pushed the market higher as Spectra Energy Partners LP subsidiary declareda force majeure event due to an unplanned outage downstream of its DelmontCompressor Station in Delmont, Pa. It was unclear how long the force majeure wouldremain in effect. "While repair efforts will commence as soon as possible,the estimated time of restoration is unclear at this time," the companysaid.

TexasEastern Transmission's 9,022 miles of pipeline, connects Texas and the GulfCoast with high demand markets in the Northeast. The pipeline can transport10.38 Bcf/d of natural gas, offers approximately 74 Bcf of gas storage and alsoconnects to East Tennessee Natural Gas and Algonquin Gas Transmission.

Northeastspot markets prices surged on the news despite the inclusion of the low demandSunday in a revised Sunday-Monday offering to accommodate the start of the newmonth. Tetco-M3 trades for a revised Sunday-Monday package jumped more than 10cents to an index around $1.40, pulling nearby markets, including Transco Zone6 NY similarly higher.

Junefutures were also influenced by the latest rig count report from that showedthe U.S. total rig count made another sharp decline in the week ended April 29, falling 11 to reacha record low of 420.

Oilrigs accounted for the bulk of the decline dropping 11 to reach 332, while thenumber of rigs targeting natural gas fell one to a record low of 87. Miscellaneousrigs increased one to reach one.

Totalnatural gas inventory remains healthy, building by a larger-than-anticipated 73 Bcf in the weekto April 22 to a total working gas supply of 2,557 Bcf, 870 Bcf above theyear-ago level and 832 Bcf above the five-year average storage level of 1,725Bcf.

Despitethe supply, concerns driven by the low rig count and evidence of a decline innatural gas production remain underlying support for natural gas futures, evenas weather outlooks suggest demand erosion through the balance of the shoulderseason.

Thesix- to 10-day weather map from the National Oceanic and AtmosphericAdministration shows a mix of below-average, average and above-averagetemperatures in the Northeast that combined should keep overall natural gasdemand at bay. Average and below-average temperatures are forecast for theMid-Atlantic region, while below-average temperatures dominate the Southeast,Gulf, Midwest and portions of the central and Southwest. Above-averagetemperatures will grip portions of the central U.S. and the Northwest.

Theeight- to 14-day map shows above-average temperatures crossing the northerntier of the country, below-average temperatures across a large portion of thesouthern tier and average temperatures across the country's midsection.

WhileNortheast spot markets were pulled higher in response to the pipeline explosionand resulting force majeure, elsewhere, lower demand anticipated over thetwo-day period covered in the day's trading held prices near unchanged.

Thebenchmark Henry Hub added a modest 1 cent on the session to an index around$1.90, while Col Gulf Mainline trades were lower by nearly 5 cents to an indexnear $1.80. Waha slipped less than 1 cent to trade atop $1.75, CIG dealsaveraged below $1.75, less than 1 cent higher, while across the West SoCalBorder traded less than 1 cent lower to an index near $1.80, PG&E Gateadded less than 1 cent to an average below $2.00, and Malin traded similarlylower to an index near $1.75.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages. To view detailed EIA Weekly Natural Gas Storagedata, go to our Natural GasStorage Page.