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Viewpoint: US east gas may break records in early 2023

  • Märkte: Natural gas
  • 23.12.22

Eastern US natural gas prices at key trading hubs this wintercould near or exceed the highest bid week prices Argus has ever reported, as regional pipeline and storage constraints collide with growing global demand for American gas.

Eastern gas production is also expected to remain flat as major Appalachia and Utica producers focused on higher shareholders returns expect a softer economy in 2023 and continued regional opposition to new pipelines.

Argus forward curves show January and February delivery of gas at many east indexes trading at prices that — if sustained in bid week and daily trading through winter — will near bid week price records.

As of 23 December, the Transco zone 5 delivered price for January was $12.91/mmBtu, and the price for February was $12.98/mmBtu, according to Argus forward curves. The highest bid week price for the index was $14.36/mmBtu in February 2022, according to Argus records going back to September 2015. Transco zone 5 runs from the southwest edge of South Carolina to the Virginia-Maryland border.

The Tetco M-3 index price for January was $11.57/mmBtu, and the price for February was $11.24/mmBtu. The west Pennsylvania-to-New York City index hit a record $14/mmBtu bid week price in February 2014. The Algonquin Citygates price for January and February were $25.51/mmBtu and $20.30/mmBtu, respectively, while the February 2014 record was $33.96/mmBtu. Algonquin delivers gas to citygates in Massachusetts, Connecticut and Rhode Island.

The higher January and February east gas prices are driven in part by gains in the futures market late December cold weather will likely leave regional inventories more depleted than previously expected, according to analysts with Gelber & Associates.

Transco zone 5 prices were poised to continue rising in the first half of 2023 — averaging $7.62/mmBtu, according to Argus forward curves — before dropping to $5.50/mmBtu in the second half of the year. Transco zone 5 tends to be priced higher than the pipeline's zone 4 and zone 6 indexes, because it is close to key demand centers and farther from prolific gas fields.

Those differences could be exacerbated as global appetite for US-produced gas increases, and the majority of proposed LNG export terminals are along the Gulf coast, according to analysts with BTU Analytics. This will set up competition between south Atlantic states and global LNG demand, even as only 12pc of US-produced gas in 2023 is forecast to be exported as LNG, according to the Energy Information Administration.

While the south Atlantic states pay prices for domestic gas that compete with global demand for LNG, New England often has to actually buy overseas-sourced LNG when heating demand is high. Most of this comes from Trinidad and Tobago.

New England cannot purchase less expensive gas from US Gulf coast export terminals because the Jones Act allows only US-flagged ships to go from one US port to another. There are, at present, no US-flagged LNG carriers.

New England also has constrained gas pipeline capacity because of regional environmental opposition to the construction of new pipelines.

Many east US gas indexes broke 21-day volatility records in November, based in part on a rapid shift from warm to cold weather amid several larger-than-expected injections into eastern US storage.

Futures prices were also volatile on prolonged uncertainty over when the 2 Bcf/d (57mn m³/d) Freeport LNG export terminal in Texas would return to operations after a fire in June. Freeport's initial restart is expected to take place in the second half of January.


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