Spot natural gas prices in the eastern US may remain volatile through the next few months as winter temperatures will be a key driver of gas consumption.
This winter was forecast to be warmer-than-average, according to the National Oceanic and Atmospheric Administration (NOAA), with November the fourth-warmest November in 142 years of climate records. If this continues through early 2022, eastern US stockpiles will likely end the heating season on 31 March slightly above average.
Mild weather so far this winter has contributed to a drop in regional prices. The dip below $4/mmBtu in December could support more widespread use of gas in the power sector and prevent end-of-season stocks from increasing further, according to Energy Aspects analysts.
Eastern inventories in the week ended 17 December were at 809 Bcf (22.9bn m³), 2pc below the five-year average, according to the Energy Information Administration (EIA).
Columbia Gas Transmission in the same week had total stocks of 216 Bcf, about 1pc lower than the five-year average. Eastern Gas Transmission last week was at a near-average total of 251 Bcf.
The Henry Hub spot price was forecast to average $4.58/mmBtu from December 2021 through February 2022, the EIA said. The average is expected to decrease through 2022, averaging $3.98/mmBtu.
Dailies at Columbia Gas, Appalachia in November averaged $4.55/mmBtu. That was over three times higher than the average a year earlier and 99pc above the same time in 2019. The Columbia Gas, Appalachia index runs from Kentucky through West Virginia and can be delivered as far north as western New York.
Spot prices at Eastern Gas Transmission South point averaged $4.47/mmBtu in November, comparing similarly with increases from previous years at Columbia Gas, Appalachia. The Eastern Gas Transmission South point comprises deliveries south of the Valley Gate, Pennsylvania, and connects with two other Eastern pipelines originating in West Virginia and Ohio.
Many regional producers — including Coterra Energy (formerly known as Cabot Oil & Gas and Cimarex Energy) and Range Resources — plan to keep production flat through 2022, which may keep eastern gas prices near recent levels. The price for the Columbia Gas, Appalachia index from January to March 2022 was at $3.33/mmBtu as of 28 December, according to Argus forward curves. The price for Eastern Gas Transmission for the same period was $3.15/mmBtu as of 28 December.
Mergers and acquisition activity in the Marcellus and Utica shales was down in 2021 from a year earlier, the EIA said. There may be more transactions in 2022 as companies stake their claim in the gas and liquids rich basins in Appalachia, the EIA said.
