Gas demand across the Northwestern US has been on the rise in the week started Oct. 10 as unseasonably cold weather moves into the region. With temperatures forecast to continue falling through mid-October, hub prices could rise in the days ahead, potentially impacting supply to neighboring markets.
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On Oct. 11, demand across the Rockies surged to its highest since early July at more than 2.5 Bcf/d amid a weather-fueled spike in residential-commercial heating. In the Pacific Northwest, colder weather pushed demand to its own two-month high at nearly 2.3 Bcf/d, S&P Global Platts Analytics data showed.
Strong res-comm has already began fueling a rally along the western slope of the Rockies where cash prices at both Kern River Opal and Northwest Wyoming Pool were up about 17 cents from the prior settlement to nearly $5.30/MMBtu, preliminary settlement data from S&P Global Platts showed.
With temperatures forecast to continue falling through the week, prices could see further upside.
In the Rockies, population-weighted temperatures are now in the low 50s Fahrenheit with a further drop to the upper 30s F forecast through Oct. 15. In the Pacific Northwest, temperatures have dipped to the upper 40s F, where they're expected to remain through mid-October, Platts Analytics data showed.
Stronger demand and prices in both the Rockies and Pacific Northwest could leave markets in southern California, Arizona and New Mexico particularly vulnerable to a cut in supply this week.
Historically, both regions have been critical suppliers to the desert Southwest. When regional demand across the Northwestern US is elevated, though, outbound flows to the Southwest typically take a hit.
Although the Permian Basin is also a swing supplier to markets in California, Arizona and New Mexico, an ongoing maintenance on El Paso Natural Gas has restricted flows from West Texas recently. Beginning in mid-August, westbound flows on El Paso dropped about 500 MMcf/d and have remained depressed since with no scheduled end-date to the maintenance.
At Kern River Opal and Northwest Wyoming Pool, balance-of-month forwards prices settled in the low-$5.90s/MMBtu on Oct. 8 – more than 30 cents premium to the Henry Hub. At the Pacific Northwest Sumas border hub, balance-October prices are even higher at $6.32, or about 70 cent above Henry Hub, S&P Global Platts most recently published M2MS data shows.
With Texas deliveries to the Southwest currently restricted, elevated demand and prices in the Rockies and Pacific Northwest could force markets in southern California, Arizona and New Mexico to bid up for supply in the days ahead – particularly on elevated-demand days.