Spot gas prices across the US Northeast surged in Nov. 22 trading, reaching highs not seen since last February amid a blast of wintry weather…
Nov 22, 2021
Spot gas prices across the US Northeast surged in Nov. 22 trading, reaching highs not seen since last February amid a blast of wintry weather that’s expected to continue into early December. The bullish short-term outlook, though, comes despite growing indications that supply will be more abundant this winter than previously anticipated.
At Boston’s Algonquin city-gates hub, the cash market more than doubled from its prior settlement to around $9.64/MMBtu. At New York’s Transco Zone 6 and Texas-Eastern M3 locations, spot prices were trading at $7.30 and $6.97/MMBtu, respectively, marking a gain of roughly 50% from the prior session, data from Intercontinental Exchange showed.
The surge in prices accompanies a steep drop in regional temperatures over this past weekend into low-40s and even mid-30s Fahrenheit – a colder-than-average weather pattern that’s forecast to continue into the first week of December, forecast data from S&P Global Platts Analytics shows.
Colder weather pushed residential-commercial gas demand in the Northeast to nearly 12.4 Bcf/d Nov. 22, matching the seasonal high recorded just three days prior. Current forecasts show demand climbing further to 15.1 Bcf Nov. 23 and averaging about 14.3 Bcf/d through the end of this month.
The uptick in demand reverses November’s below-average trend for Northeast res-comm, which has largely unperformed compared with the historical average. In November, gas demand from homes and businesses in the Northeast has averaged about 10 Bcf/d, undershooting the prior five-year average by over 600 MMcf/d, Platts Analytics data shows.
After a slow start to the heating season, the influx of colder weather promises a bullish run for Northeast gas prices over the next week or so as the region begins drawing down storage inventories.
Beyond early December, though, the outlook for Northeast gas prices appears less bullish.
In recent weeks, forwards prices at hubs in Boston and New York are down sharply from October highs amid growing signs that winter gas supply could be more abundant than previously anticipated.
Since the start of November, mild temperatures in the Northeast have left regional inventories relatively untouched, despite this season’s below-average storage build, which crested just below 1 Tcf. Current estimates from Platts Analytics show inventories at 975 Bcf – now at par with the prior five-year average.
Potentially adding to winter supply are recent gains in Appalachia production. Earlier this month, output from the Marcellus and Utica eclipsed its year-ago record, hitting 34.7 Bcf/d. Following recently updated production guidance offered by Appalachia producers on third-quarter earnings calls, it’s conceivable that output could surpass 35 Bcf/d this winter. Both Coterra Energy and National Fuel Gas have projected an increase this winter as they move to fill their respective reserved capacities on Transcontinental Gas Pipe Line’s Leidy South expansion, scheduled for startup Dec. 1.
On the demand side, an updated seasonal forecast from the US National Weather Service offers a tamed outlook for Northeast temperatures and demand from December to February. According to the forecast published Nov. 18, New England will see a 50% to 60% chance for above-average temperatures over the period. In states farther south, the upside risk is about 40% to 50%.
At Algonquin city-gates, the December contract has fallen about 40% since early October to the mid-$11s/MMBtu. The January and February contracts, meanwhile, have both declined about 20% to the $19- to $20/MMBtu range – still historically high for both winter months.
At Transco Z6 New York, the peak winter contracts are also down about 20% from October highs to the mid-$6s for December and the low-$10s/MMBtu for January and February, S&P Global Platts’ most recently published M2MS data shows.
Nov 10, 2021
S&P Global Platts’ Ciaran Roe and Ira Joseph break down the unprecedented price movements in recent LNG and gas markets. The discussion focuses on how we arrived at this point of unusual tightness and whether the conditions that brought us here will persist. Then the discussion turns to the evolving pricing relationship between JKM and TTF, how LNG imports have been trading above Europe’s main gas hub for months, and how the US Henry Hub fits into the mix. The final segment looks ahead to how short-term price volatility may trigger changes in long-term gas and LNG contracts and the types of indexation that will underpin them.
Note: Prices discussed as of date of recording 28th October 2021.
Nov 01, 2021
The UN Climate Change Conference taking place in Glasgow, Scotland, has been hailed as the world’s best last chance to get a handle on the climate crisis. In the US, groups like the Electric Power Research Institute are working on climate solutions and advancing energy technologies to meet increasingly ambitious decarbonization goals set by companies and governments. As part of that effort, EPRI, along with its natural gas counterpart, launched the Low-Carbon Resources Initiative, an international R&D collaborative aimed at finding an energy carrier suitable for a decarbonized, sustainable future.
Senior editor Jasmin Melvin spoke with Neva Espinoza, EPRI’s vice president of energy supply and low-carbon resources, about the organization’s work on deep decarbonization and progress towards deployment of low-carbon fuels of the future.
Stick around after the interview for Chris van Moessner with the Market Minute, a look at near-term oil market drivers.
European gas markets enter winter at record highs after TTF prices soared 340% this summer. The rally was triggered by depleted EU gas stores and driven by…
Oct 05, 2021
European gas markets enter winter at record highs after TTF prices soared 340% this summer. The rally was triggered by depleted EU gas stores and driven by global competition for LNG as well as Russia’s reluctance to send additional gas volumes via Ukraine.
A near term re-balancing looks an unlikely prospect with one potential supply-side savior an early approval and startup of the Nord Stream 2 pipeline.
Power prices are closely tied to gas after waves of coal closures, but coal is set for a revival this winter. As such the COP26 climate talks are set to take place in the context of spiraling prices and rising emissions.
Nov 09, 2021
Jun 25, 2021
Natural gas storage inventories in the US have crept within 5% of the five-year average and Canada is pushing even higher as the injection season…
Oct 28, 2021
Natural gas storage inventories in the US have crept within 5% of the five-year average and Canada is pushing even higher as the injection season winds down. However, key hubs throughout the US and Canada are reporting prices not maintained since the dawn of the shale revolution due to North America’s newfound exposure to global gas market forces. If the US and Canada experience a colder-than-normal winter, and drops inventories below 1 Tcf, pricing analysts expect the benchmark Henry Hub to crack $10/MMBtu, with others across the continent following suit.
Oct 26, 2021
In this week highlights, carbon credits are soaked up by crypto miners; temperatures forecast to drop across Europe and deepen gas price crisis; France sees…
Nov 22, 2021
In this week highlights, carbon credits are soaked up by crypto miners; temperatures forecast to drop across Europe and deepen gas price crisis; France sees chances of net power imports as electric heating demand soars; and prices in European oil markets dip as supplies open up.
– Gas crisis to ratchet if temperatures drop (01:57)
– French electric heat issue return (02:47)
– Prices dip as supplies open up, Europe clamps down (03:30)
The impact of rising coronavirus infections is back on the headlines with the number of cases rising in major European economies, affecting mobility. We also…
Nov 22, 2021
The impact of rising coronavirus infections is back on the headlines with the number of cases rising in major European economies, affecting mobility. We also take a look at Russian gas flows into Europe, Southeast Asia’s appetite for Middle Easter crude, the surge in demand for Australian carbon credit units, and China’s soybean demand in the years ahead.
What’s happening? European mobility is declining on both seasonality and the recent rise of coronavirus cases. Despite the decline, mobility has held up better than in 2020. At this time last year, mobility had declined to only 75% of January 2020 pre-pandemic levels. Mobility correlates reasonably well with combined gasoline and diesel fuel demand in Europe, where diesel fuel accounts for 75% of the total, albeit on a declining trend.
What’s next? With COVID-19 cases rising throughout Europe, mobility is likely to continue falling, perhaps appreciably so. S&P Global Platts Analytics expects combined gasoline and diesel fuel demand to see a continuing decline into end-2021 and January 2022. Year-end transport fuel demand is likely to slip to 1.5%-2% below average 2019 levels, but still be up significantly from what was seen in 2020.
What’s happening? No additional month-ahead pipeline capacity was booked to ship Russian gas to Europe on the two key transit routes via Ukraine and Belarus for December. Russian gas transit via Ukraine and Belarus has averaged only 88 million cu m/d and 19.3 mcm/d, respectively, or a combined 107.3 mcm/d so far in November.
What’s next? Russian flows will remain low, unless short-term capacity is booked in day-ahead and/or within-day auctions next month. The supply outlook is further complicated by a recent decision by the German energy regulator to suspend certification of the Nord Stream 2 pipeline that will carry Russian gas to Germany, meaning first flows on the new string are unlikely to start in the near term. There is little precedent for significant short-term day-ahead or within-day capacity bookings for Russian gas transit via Ukraine and Belarus, but they are likely to be necessary to allow Russian gas flows to rise to meet the seasonal increase in European gas demand in the absence of flows via Nord Stream 2. The market will therefore be watching the results of these daily auctions closely and any capacity bookings or lack of capacity bookings will have the potential to drive significant market volatility throughout December at European gas hubs.
What’s happening? Carbon credit prices are going up on the back of positive sentiment following the UN Climate Change Conference, or COP26. Australia has seen a surge in demand for carbon credits, driving prices to record highs. Australia carbon credit units, or ACCUs, reached a record A$38.00/mtCO2e ($27.63/mtCO2e) Nov. 17. Prices have now climbed more than 95% from early July, growing alongside global demand for carbon credits since the second half of the year. Australia has been expanding the project types eligible for generating ACCUs, covering more and more new technologies and methods. The government has also put in place policies to simplify registration and trading practices to reduce market entry barriers. This attracts local farmers to supply ACCUs from reforestation, soil carbon sequestration and other methods.
What’s next? Demand for ACCUs is expected to increase significantly over the next decade. The Australian government is increasing the specialized fund for purchasing carbon credits while private companies under the compliance emission trading scheme are building up their ACCU portfolios and hedge future exposures. A growing number of corporates outside the compliance regime is also proposing voluntary emissions reduction targets and investing in ACCUs to meet their commitments.
What’s happening? The market has been worried about China’s slackening soybean demand in recent months on the back of negative crush margins and sporadic cases of the African swine fever. China-based crushers have been struggling with negative margins amid high costs of raw soybeans and sliding soybean meal prices.
What’s next? Platts Analytics expects China’s robust pork industry consolidation to support soybean demand in the coming years, overshadowing the negative crush margin trend seen in 2021. According to Platts Analytics, China’s soybean demand in 2022 and 2023 are forecast at record levels of 102 million mt and 104 million mt, respectively.
Full infographic: China’s soybean demand set for record levels
What’s happening? Southeast Asia’s state-run oil and refining companies typically secure around 70%-75% of crude oil requirements via term deals and their own upstream operations, while the rest is sourced from spot purchases. However, the refiners are looking for every possible means to reduce their spot procurement ratio recently as market premiums extend rally amid tight supply conditions.
What’s next? Thailand’s PTT Exploration and Production, or PTTEP, plans to bring home most of its equity crude barrels from its overseas upstream operations in 2022 rather than trading the oil, taking some pressure off domestic refinery feedstock procurement managers who constantly seek top-up barrels in the expensive spot market. PTTEP is set to provide domestic refineries at least 5 million barrels of Oman crude for delivery over January-June 2022. Apart from the equity Oman barrels, PTTEP also aims to supply domestic refineries its equity barrels from Algeria, Australia and the Americas.
Reporting and analysis by Alan Struth, Jake Horslen, James Huckstepp, Ivy Yin, Eric Yep, Asim Anand, Phil Vahn, Fred Wang, and Pankaj Rao.
Nov 15, 2021
Enverus PlattsLIVE Interview with Rob Allerman