Natural gas spot prices in the Northeast and Midwest have felt the effects of above-average temperatures and ample supply over the last two weeks, while Southeast and Southwest spot gas prices have been supported by strong export demand.
Some Northeast spot gas prices plunged to all-time record lows on Nov. 6, including Algonquin city-gate and Transco Zone 6 NY, as warmer-than-normal temperatures and strong supply put downward pressure on prices.
In the New England area, Algonquin city-gates dropped 40 cents to 37.50 cents/MMBtu for weekend flows, the lowest price seen on record within S&P Global Platts price reporting history.
In New York, Transco Zone 6 NY also reached all-time lows, settling 25 cents lower at 28 cents/MMBtu for Nov. 7-9 flows.
US Northeast natural gas cash prices rebounded from the Nov. 6 lows over Nov. 9-11, the most recent trade dates as of publication. Algonquin city-gates jumped 52 cents to $1.56/MMBtu for Nov. 12 flows, while Transco Zone 6 NY rose 27 cents to $1.42/MMBtu. According to S&P Global Platts Analytics, total Northeast gas demand jumped more than 1 Bcf/d.
The remainder of Algonquin city-gates winter strip basis has steadily weakened over the past week, as Northeast prices dropped to all-time record lows when multiple Northeast locations were trading below 30 cents/MMBtu. As of Nov. 10 settle, the remainder of Algonquin city-gates winter strip was trading at a basis of $2.21/MMBtu.
The National Weather Service forecast for the Northeast region shows average temperatures to be about 65 degrees Fahrenheit for Nov. 11, more than 15 degrees above seasonal norms for this time of the year. Looking ahead, the National Weather Services' 6-10 day outlook forecast continued above-average temperatures for much of Northeast region.
Upper Midwest prices muted amid strong supply
Upper Midwest natural gas prices stayed largely flat over the past two weeks amid strong storage and slow recovery in production.
Chicago city-gates spot settles averaged about $2.58/MMBtu for Oct. 28 - Nov. 11, largely in line with year ago levels for the same time, while balance-of-the-month settles Nov. 2-11 averaged about $2.54/MMBtu as above-average temperatures are expected to hold.
Total working gas inventories stood at about 1.119 Tcf for the week ended Oct 30, a surplus of 3.3% to the five-year average according to data from US Energy Information Administration.
On the production side, marginal increments were observed in supply as output in the Bakken strengthened. Bakken production stood at about 2 Bcf/d Nov. 10 after averaging 1.9 Bcf/d July to date, squeezing out flows from West Canada to The Upper Midwest along Northern Border Pipeline. West Canada flows along Northern border hit an all-time low Nov. 7-8 at just 119 MMcf/d, Platts Analytics data showed.
In November so far, total production in the Midcontinent producing areas averaged about 8.5 Bcf/d, only 1.3 Bcf/d behind year ago levels. In comparison May-August production in 2020 was 2.1 Bcf/d below year-ago levels.
Total demand in the region averaged 15.5 Bcf/d in the month thus far, down 4.7 Bcf/d amid below two-year average temperatures during the same time, amid warmer-than average temperatures. Subdued demand and ample supply in the region may keep prices muted unless significant weather appears in the Upper Midwest and neighboring areas.
Southeast prices elevated on strong LNG feedgas demand
Southeast natural gas prices remained elevated as of late as there was a bullish sentiment in the market from increased LNG feedgas demand. The cash price for Henry Hub increased to $2.77/MMBtu on Nov. 11. This was the highest level this location had reached since Nov. 3. Henry Hub has averaged $2.72/MMBtu in November so far, which is largely in line with what the location averaged for the same days in 2019.
Strong US Gulf Coast LNG feedgas deliveries have supported higher spot gas prices in the region. Month-to-date feedgas volumes have averaged 9.5 Bcf/d.
Adding further upward pressure, onshore production has averaged 32.80 Bcf/d so far this month, 1.33 Bcf lower than what production was at this time last year, according to Platts Analytics.
The combination of strong Southeast export demand and higher Rockies gas demand has given Permian spot gas prices some stability above $2/MMBtu for the week of Nov. 9, after a volatile October that saw repeated dips into the negative. Waha Hub has averaged $2.46/MMBtu for Nov. 9-11.
