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Looming Northeast supply shortage drives steady advance in winter gas prices


Transco Z6 New York hits upper $7s/MMBtu for January, February

Algonquin CG peak season pricing at $13 to $14/MMBtu

Northeast storage trails 5-year average by 54 Bcf, or 7%

Natural gas prices in the US Northeast market area could hit their highest in four years or more this winter as lagging storage volumes and flat production are stretched thin by strong seasonal demand.

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Forwards markets are already bracing for the increasingly likely scenario. Since the start of April, peak-winter-season prices have surged at downstream hubs across the Northeast Atlantic Seaboard.

At Transco Zone 6 New York, the December-January-February calendar-month average has climbed to more than $7/MMBtu recently, up from levels around $5.50 in early April. At Boston-area Algonquin city-gates, the peak-winter calendar-month average has climbed to the mid-$12s/MMBtu recently, gaining about $5.50 or almost 80% since the start of April, S&P Global Platts data shows.

At both locations, the winter forward contracts are priced at their highest for January and February which recently settled in the upper-$7 range at Transco Zone 6 and the $13 to $14 range at Algonquin.


The runup in Northeast winter gas prices over the past several months comes as regional storage inventories appear increasingly ill prepared to handle the upcoming spike in seasonal heating demand.

As of early August, gas storage in the Northeast is estimated at 690 Bcf – about 54 Bcf, or 7%, below the prior five-year average and 128 Bcf, or almost 16%, behind the region's year-ago inventory level, data from S&P Global Platts Analytics shows.

Since the start of May, storage injections in the Northeast have averaged about 3.2 Bcf/d – almost 300 MMcf/d below the prior five-year average. While a recent uptick in the pace of injections has narrowed the region's inventory deficit from over 60 Bcf, the speed of this summer's build will need to accelerate to about 3.4 Bcf/d through early November to reach typical pre-winter inventory levels at over 1 Tcf.

Supply & demand

Relatively flat production in the Appalachian Basin is also partly to blame for supply tightness in the Northeast this summer, which has limited storage injections. In July, producers in the Marcellus and Utica have turned out about 33 Bcf/d – just 700 MMcf/d more than they did last July.

Ahead of this winter's peak-demand season, at least some of Appalachia's producers are likely to ramp up output. If that doesn't happen, winter 2021-22 production would fall nearly 450 MMcf/d short of last season's December to February average at over 33.4 Bcf/d, Platts Analytics data shows.

While the Northeast region has seen an overall decline in regional gas consumption this summer, the additional supply length has been more than offset by demand from neighboring markets – a trend that Platts Analytics expects will continue through the upcoming winter months.

From June 1 to date, Northeast demand has averaged 16.4 Bcf/d, marking a drop of more than 800 MMcf/d from last summer. Over the same period, though, the Northeast has delivered an additional 2 Bcf/d to neighboring markets in the Southeast, the Midwest and Eastern Canada, than it did last summer.