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Cold Surge Will Pressure Northeastern Physical Gas Prices Into Next Week
Surging winter cold and constrained pipeline throughput throughout the Northeast teamed up this week to send northeastern natural gas cash prices into the stratosphere, and if projections from the Energy Information Administration (EIA) hold up, there may be no relief until the middle of next week.
In a Northeastern Winter Natural Gas and Electricity Alert issued Thursday, EIA warned that most pipelines from the west and south into New England remain constrained (Iroquois is at 82%), and that flows on the marginal pipeline into New York City (Texas Eastern – TETCo) are constrained at key points. The EIA added that flows of liquefied natural gas (LNG) stored at Canaport in New Brunswick into New England were scheduled to be 848 MMcf/d on Thursday, which is about 748 MMcf/d more than during periods of milder weather.
On Wednesday cash points serviced by Transcontinental Gas Pipe Line, or Transco, were especially hard hit following a system-wide operational flow order (OFO). “Transco has experienced below normal temperatures and significant gas demand over most of its market area. Temperatures are forecasted to continue to be below normal for the next several days,” it stated.
The brutal burst of winter cold that began to blanket much of the East early this week pushed a handful of northeastern natural gas delivery points to record highs on index for a second consecutive day Wednesday, according to NGI data (see Daily GPI, Jan. 24).
Four northeastern points erased all-time record highs set Tuesday with new marks on Wednesday for Thursday delivery. Iroquois Zone 1 gained $13.06 to average $29.94, while Iroquois Waddington added $5.32 to average $25.05. Tennessee Zone 5 200 Line increased by $6.42 to a new high of $19.46 and Tennessee Zone 6 200 Line bumped higher by $10.95 to $31.73.
Gas into New York City for Thursday flow on Transco Zone 6 vaulted $13.07 to $35.33, and deliveries to the Algonquin Citygates fetched a $10.18 increase to $31.32.
New records were notched again on Thursday for Friday delivery as sub-freezing temperatures and pipe constraints remained in place. More than a handful of pricing points in the region saw their indexes rise more than a dollar, with at least one spot recording a gain of nearly $3.50/MMBtu (see related story).
In another action aimed at ensuring electric power continued to operate smoothly in New England, the Federal Energy Regulatory Commission (FERC) issued an order effective Thursday allowing ISO New England (ISO-NE) to share real-time information on natural gas-fired power generation resources with interstate gas pipeline operators. After talking the issue to death all summer long, FERC approved ISO-NE’s interim information sharing plan through April 30 to head off concerns about unreliable generation dispatch (see related story and Daily GPI, Aug. 31, 2012).
Looking ahead, the EIA said forecasts show that both New York City and Boston can expect low temperatures through the day on Friday, with Thursday’s lows expected to be 12 degrees in New York City and 7 degrees in Boston. According to Bentek Energy, natural gas demand will remain at high levels through Friday, and in New England, Monday’s load may be slightly higher than on Friday.
“Prices for delivery [Thursday] are near $30 in New England and over that in NYC,” the EIA said in its alert. “The New England price is the highest since the January 2004 cold snap; the NYC price is the third highest since that time. However, New England’s price is lower than NYC’s, perhaps reflecting the inflow of stored LNG from Canaport.”
Algonquin and TETCo are requiring hourly scheduling from generators, according to EIA. Algonquin and Iroquois said they will issue OFOs, restricting unscheduled service as necessary.
Earlier this month, the EIA said since November, New England has had the highest average spot natural gas prices in the nation with prices at the Algonquin Citygate trading point, “a widely used index for New England natural gas buyers,” coming in at $3/MMBtu higher than prices at the Henry Hub, and more than $2/MMBtu higher than average spot price at Transco Zone 6 NY, which historically trades at prices similar to those in New England.
“Full pipelines from the west and south limit further deliveries from most of North America, while high international prices and declining production in Eastern Canada pose challenges in making up the difference from the north and east, except at higher prices,” the EIA said on Jan. 18 in a Short-Term Energy Outlook supplement.
“As a result of these market conditions, New England natural gas and electric power prices this winter could be volatile at times. During November and December, spot natural prices in the northeastern United States seesawed in relation to weather-driven pipeline constraints. This price volatility has continued into January 2013 to date.”
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