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Weak demand, elevated storage to pressure US Northeast gas prices

Highlights

Market-, producer-area prices at or below $1/MMBtu

Regional demand arrested by weather, maintenance

Storage at 1.014 Tcf, likely just 50 Bcf below maximum

Over the next week, spot gas prices in the US Northeast could test new record lows as a confluence of factors keep downward pressure on demand, just as regional storage inventories approach cavern-top.

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In Oct. 2 trading, cash price in the Northeast market-area and Appalachia took reprieve from prior-day multiyear low settlements, rising as much as 20 cents/MMBtu as regional temperatures dipped into the upper 50s Fahrenheit, driving an uptick in gas-fired heating demand.

At the Boston-area Algonquin city-gates hub, spot prices were up 21 cents to $1.03/MMBtu. At Transco Zone 6 New York, the market surged 29 cents to around 79 cents/MMBtu for next-day flows.

In the Appalachian producer area, Dominion South rallied 24 cents to 81 cents/MMBtu, while the nearby Columbia Gas Appalachia location added 14 cents to trade also at 81 cents/MMBtu.

Higher cash prices could be fleeting, though.

Over the weekend, total Northeast demand is projected to bottom out nearly 9%, or about 1.4 Bcf/d, below its Oct. 2 estimated level at over 16 Bcf/d. Regional demand will remain below 15 Bcf/d through at least Oct. 7, according to a forecast published by S&P Global Platts Analytics.

Mild weather isn't the only factor that will weigh on Northeast demand and prices over the next week.

Seasonal maintenance at Dominion Energy's Cove Point facility and elevated Northeast gas storage levels will also push additional supply back into the market.

Maintenance, storage, production

On Sept. 21, LNG production at Cove Point was abruptly halted as the facility's single liquefaction train was taken offline for annual maintenance. Based on previous maintenance timelines over the past two years, Cove Point could be expected to remain down for approximately 23 to 24 days, or until about mid-October, Platts Analytics data shows.

The export facility's outage pushes a significant volume of additional gas back into the Northeast market. Year-to-date, feedgas flows to the facility have averaged over 720 MMcf/d. On Oct. 2, feedgas was estimated at zero, where it has remained since Sept. 21.

Potentially weaker storage injection demand could also push some supply back into the Northeast market.

On Oct. 2, total regional inventories were estimated at 1.014 Tcf, or about 50 Bcf below the region's observed maximum storage level at just over 1.06 Tcf, Platts Analytics data shows.

With inventories in the Northeast currently at their highest early October level since 2012, potential limits on injection capacity at regional facilities could put constraints on daily storage demand – another factor that's likely to push more supply back into the market.

On the supply side, the Northeast market has seen at least some relief from surplus production after a move by the region's largest producer, EQT, to curtail a net 425 MMcf/d in output beginning Sept. 1. Following a notable drop in output in just the past 10 days, it's possible that other Marcellus and Utica producers have followed EQT's lead.

In the 10 days since Sept. 23, Northeast production has averaged just 31 Bcf/d, down from late-summer levels in the upper-32 Bcf/d area, Platts Analytics data shows.