Milder weather forecast for the US Northeast in the week starting Aug. 19 is projected to push regional gas-fired power burn demand to its lowest since late June in a potential downside risk to spot gas prices.
From Aug. 20-23 the Northeast population-weighted temperature will trend more than 7 degrees below average and briefly fall to a projected 10 degrees below normal Aug. 21. In Boston and New York City, daily highs will dip into the mid-70s with overnight lows projected to fall to around 60 degrees, according to forecast data published by AccuWeather and S&P Global Commodity Insights.
As regional temperatures cool, power generators are expected to tap the brakes on gas demand, pushing Northeast power burn below 10 Bcf/d for the first time in seven weeks. From Aug. 20-25, regional burns will average an estimated 9.6 Bcf/d. By comparison, Northeast power demand has averaged 12 Bcf/d August to date and trended at nearly 12.8 Bcf/d in July, data from Commodity Insights showed.
Prices
At market hubs across the Northeast, and at supply hubs in Appalachia, cash prices were already down about 15-25 cents in Aug. 16 trading as spot gas requirements pulled back ahead of the cooler weather.
At Algonquin city-gates, gas prices for the weekend flow dates were moving around $1.60/MMBtu, down from a prior-day settlement at $1.78. At Transco Zone 6 New York, the cash market slumped to around $1.50, down from a prior-day settlement at nearly $1.74. In Appalachia, prices at the region’s benchmark hub Eastern Gas South were off about 15 cents on the day to trade around $1.45, data from Intercontinental Exchange and Commodity Insights showed.
As summer heat across the Northeast fades into late August, the region’s lengthening supply balance could pose a more enduring risk to gas prices as storage injections begin building momentum into fall.
Storage
On Aug. 15, the US Energy Information Administration delivered another surprisingly bullish US natural gas storage report, revealing just a 4 Bcf injection in the East Region for the week ended Aug. 9
After hitting an annual high in mid-June, the East Region storage surplus now stands at just 65 Bcf —down from over 120 Bcf just two months ago. Over the past week, flagging demand in the Northeast gas market has left more supply available for injection. According to an early projection from the Commodity Insights gas storage model, the East could post an injection of 13 Bcf for the week to Aug 16 — still shy of the average 18 Bcf injection reported over the past five years.
Looking ahead to the storage week ending Aug. 23, though, EIA will likely report an even larger injection potentially fueling a rebound in the East Region gas storage surplus just ahead of the lower demand fall shoulder season. In the forward gas market, traders are already bracing for wide basis discounts at Northeast hubs — especially in Appalachia where steep discounts are routine in autumn.
Although September basis discounts at Northeast hubs have actually narrowed since mid-summer — about 10 cents at Algonquin and 35 cents at Transco Zone 6 New York and Eastern Gas South — a rebound in the East Region storage surplus could easily erode the recent gains.
Source: Platts