Northeast gas prices, demand surge as winter’s final gasp arrives

Winter weather could see its final hurrah in the US Northeast heading into early March delivering, potentially, the last big spike in regional gas prices along with a fleeting surge in heating demand.

In Feb. 28 trading, prices at New England gas hub were up sharply with smaller gains at locations farther south in New York, New Jersey and the Mid-Atlantic region.

At the Boston-area Algonquin city-gates hub, cash prices more than doubled on the day to trade just under $10/MMBtu. At Iroquois Zone 2, a key location for imported gas from Canada, spot prices were moving at just over $9. In the metro New York market, cash prices were trading around $4.30 at Transco Zone 6 New York and about $3.80 at Texas Eastern M-3. Farther south, in Transco Zone 5, gas markets were moving between $3.80-$3.95, data from Intercontinental Exchange showed.

Weather, demand

The surge in spot gas prices for the weekend flow dates, March 1-3, comes as frigid temperatures loom over the US Northeast. In Boston, high temperatures trending from the upper-40s to low-50s Fahrenheit Feb. 28 to March 1 will plunge to the low teens by early morning March 2 with similarly chilly weather expected into March 3, a forecast published by AccuWeather showed.

Farther south in the New York metro area, overnight temperatures March 1-2 will dip to around 20 degrees while Baltimore and Washington DC are forecast to see lows in the mid-20s F.

According to a short-term forecast from S&P Global Commodity Insights, the Northeast population-weighted temperature will dip to into the upper-20s F from March 2-3 with regional heating demand expected to hit five-year highs for early March around around 17-18 Bcf/d.

Outlook

Looking beyond early March, current weather models show regional temperatures remaining above freezing, even during a second March cold spell forecast from March 7-10. Beyond mid-March, the arrival of more spring-like weather will likely keep temperatures from plunging again.

Although extreme winter weather in the Northeast may see its final gasp by early March, rapidly dwindling storage levels in the region could have a more lasting impact on demand and prices.

According to the US Energy Information Administration's latest estimates, East Region storage now stands are 362 Bcf, or about 18%, below the five-year average as of the week ended Feb. 21. Assuming regional stocks end the heating season around that level, stronger injection demand could support high gas prices at producer hubs this summer.

At Eastern Gas South, forward gas prices for June, July and August are currently averaging around $3.40/MMBtu. Over the same period last summer, gas prices at the benchmark upstream hub averaged just $1.45, according to data from Platts, part of S&P Global Commodity Insights.