New England gas prices top $20 on AGT system restrictions, demand spike

Natural gas prices in New England are up sharply over past several days as strong demand on Algonquin Gas Transmission collides with a planned service outage on the pipeline, prompting the system operator to impose operational flow orders to manage system pressure and deliveries.

On July 20, the cash market at Algonquin city-gates surged to nearly $23/MMBtu, more than doubling on the day. At Iroquois Zone 2 spot prices jumped to nearly $21. At both locations, prices are up from weekend settlement levels at under $7/MMBtu, Intercontinental Exchange and Platts data showed.

Earlier this week, constraints on Algonquin began lifting spot gas prices at the Boston-area city-gate. Since at least July 16, capacity on Algonquin's J-system delivering into Boston has remained at zero, down from over 250 MMcf/d owing to a planned maintenance outage that could continue to limit deliveries into the metro-area.

The transmission outage on the J-system is currently scheduled to conclude July 21 but is subject to change and was previously extended an additional two days earlier this week by the pipeline operator.

Demand

Over the past several days, the system outage on Algonquin has coincided with a surge in demand.

On July 20, Algonquin deliveries to local distribution companies or LDCs edged up to nearly 600 MMcf/d, up from levels under 300 MMcf/d earlier this week. Power plant deliveries have also climbed over the past several days to an average 950 MMcf/d July 19-20, up from about 650 MMcf/d over the weekend, Platts Analytics data shows.

Rising LDC and power demand on Algonquin's pipeline has accompanied a recent spike in temperatures with Boston and Hartford, Connecticut, recording highs in the low- to mid-90s Fahrenheit on July 20.

Amid rising demand downstream demand, nomination requests on Algonquin have exceeded operational capacity at some locations, resulting in the imposition of some flow restrictions in accordance with capacity priority.

"AGT requests that customers/point operators on AGT be aware of the impact non-ratable hourly takes from the system may have in causing delivery pressures reaching lower than desired levels," the operator said in a system-wide notice published July 20.

"If customers/point operators don't manage hourly takes from the system, AGT may be required to impose further restrictions or courses of action in order to maintain the operational integrity of the system," the pipeline operator said in a warning to shippers.

Supply

Strong demand on Algonquin this week has fueled a spike in the system's pipeline receipts from other regional interstates as shippers reshuffle regional supply in response.

Deliveries from Maritimes and Northeast pipeline jumped to 215 MMcf/d on July 20, up from zero over the nearly three-weeks prior. Receipts from Texas Eastern Transmission at Lambertville, Iroquois Gas Transmission at Brookfield and Tennessee Gas Pipeline at Norfolk have also surged this week, data from Platts Analytics shows.