Appalachian gas futures prices rally as northeast regional storage lags


Strong points

Sept, Oct push prices up 14% to $ 1.90 / MMBtu

Northeast storage is below the five-year average of 60 Bcf

East Texas Maintenance Poses Price Rise Risk

Gas prices in the fall of 2021 in the Appalachians have recently increased as record electricity use and strong regional outflows limit storage construction this summer, fueling a bullish outlook for late-season injection demand. season.

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Over the past week, Eastern Gas Transmission – formerly known as Dominion South – saw its calendar month futures prices for September and October climb about 23 cents, or nearly 14%, to about 1 , $ 90 / MMBtu, recently released S&P Global Platts. M2MS data is displayed.

In recent fall seasons, spot prices at the benchmark regional hub hit annual lows from late September to mid-October, often falling below the $ 1 level.

The recent rise in futures prices in the fall of 2021, which was also accompanied by a rally in the spot market, comes as gas-fired electricity consumption in the Northeast hits record highs for the start of the summer season. From June 1 to date, consumption demand for electricity in the northeastern United States has averaged 9.2 Bcf / d, making this month’s highest average on record for the month of June, according to data from S&P Global Platts Analytics.

The record burns were accompanied by surprisingly strong exits to neighboring markets in the Midwest and Southeast. In June, transmissions from the Northeast averaged nearly 14.5 Bcf / d. Compared to the corresponding period of June 2020, flows to neighboring markets are up by around 2.1 billion cubic feet / d this month, despite ongoing flow restrictions on one of the main corridors Appalachian exit – Texas Eastern Transmission.

Storage

Large outflows and record electricity consumptions in the northeast have left a limited supply of gas available for injection into regional storage this month. From June 1 to date, Northeast shippers have added just 71 billion cubic feet to their inventories, leaving regional inventories at 562 billion cubic feet, nearly 60 billion cubic feet below the level average over five years, based on data from Platts Analytic.

With inventories currently at their lowest end of June since 2018, Platts Analytics estimates that injection demand may need to increase significantly in the latter summer months to reach historic pre-winter inventory levels at higher. of 1 Tcf. High end-of-season injection demand could push up gas prices in the Appalachians and the Northeast in September and October – a factor that likely contributed significantly to the recent futures price hike at Eastern. Gas.

However, continued maintenance on Texas Eastern could counter the uptrend in the market by limiting available exit capacity and end-market optionality for shippers, just when they are needed most.

Maintenance risk

Southbound flows over Texas Eastern have declined significantly since the PHMSA issued its amended corrective action order on June 1, effectively suspending the agency’s renewal of the pipeline’s authorization to operate at full capacity. with the re-establishment of a 20% pressure restriction on the 30-inch system between the Kosciusko and Uniontown compressor stations.

Data from Platts Analytics shows net flows along east Texas to the southeast have averaged 1.1 billion cubic feet per day so far in June, down from about 814 million cubic feet per day, or 43%, from May. Some of that northeast gas was diverted to flow south through the Tennessee Gas Pipeline, which saw an increase of 360 MMcf / d, or 24%, from May levels. The Midwest also absorbed some of the stranded gas from the Northeast, with monthly flows from the Northeast to the Midwest of about 150 MMcf / d from May.

Enbridge expects Texas Eastern’s first return to full service to be near the end of the third quarter of 2021, according to an update released on June 10.


About Keith Tatum

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