US northeast spot natural gas prices this winter jumped from year-earlier levels as higher heating demand trumped a rise in production levels and higher inventories.
Prices at key supply indexes in the region this winter averaged at least 50pc higher than their winter 2015-16 levels, including hubs that serve demand in New York City and New England.
Temperature-wise, the 2016-17 winter was one of the warmest on record for the US, according to the US National Oceanic and Atmospheric Administration.
But regions in the northeast totaled more heating degree days (HDDs) overall this winter compared with last year. The New England region had 3,624 HDDs between November and February, up by 6pc from the year earlier. And the mid-Atlantic totaled 3,339 HDDs, up by 4pc from the prior winter.
Storage inventories in the northeast started the winter at 946 Bcf (26.8bn m³), or 2pc higher than the year-earlier level. But inventories should exit this winter lower than the year prior following a few late-season cold snaps, including a winter storm that hit the region last week. Northeast storage fell to 309 Bcf in the week ended 17 March, 32pc lower than a year earlier.
Spot prices at Algonquin Gas Transmission Citygates averaged $4.68/mmBtu this winter, up by 51pc from their prior winter average. Transcontinental Gas pipeline (Transco) zone 6 in New York averaged $3.41/mmBtu this winter, up by 52pc from the corresponding year-earlier period. And prices at Iroquois Gas Transmission zone 2 and Tennessee Gas pipeline's (TGP) 200 Line in zone 6 averaged about 60pc above their 2014-15 winter levels, while Texas Eastern Transmission M-3 prices soared by 87pc above the year earlier.
And production region prices rose even higher from the year-earlier than demand region prices. Spot prices at TGP zone 4 Marcellus averaged at $2.49/mmBtu this winter, and Dominion South averaged at $2.61/mmBtu, both more than double average prices at those indexes last winter.
Prices have jumped despite an increase in production levels from the Marcellus and Utica shales in nearby Appalachia. Marcellus volumes rose by 5pc to about 18.6 Bcf/d in November 2016-February 2017 from the corresponding prior-year levels. And Utica output rose by 15pc to average about 4 Bcf/d this winter.
Increased takeaway capacity via the Rockies Express pipeline zone 3 expansion has allowed more Appalachian gas to reach markets to the west, boosting production region prices. More market tightness may be ahead next winter as a few pipeline expansions come on line later this year.
Argus forward prices for next winter average $5.88/mmBtu for Transco zone 6 in New York and about $6.78/mmBtu at Algonquin Citygates, a respective rise of 72pc and 45pc from this winter's spot prices. And Dominion South forwards are averaging at $2.97/mmBtu for winter 2017-18, up by 14pc from this winter's spot price average.
