Europe's gas supply concerns, high prices put New England forward market at risk

Winter 2022-2023 gas prices in New England were up more than 15% in the past five weeks as mounting concern over European energy supply next winter kept the global gas markets under pressure.

At the Boston-area Algonquin city-gates hub, January 2023 forward prices strengthened to over $23/MMBtu in recent trading, up from levels closer to $20 in late January, Platts M2MS forward assessments from S&P Global Commodity Insights showed.

Historically, New England's gas market has faced exposure to global LNG prices during the peak heating season given the region's pipeline constraints and its limitations on delivery during periods of elevated demand.

This winter, high global gas prices briefly pushed peak-season forward at Algonquin to over $30/MMBtu. In January, cash prices at the hub climbed nearly as high, trading to the upper-$20 range at the end of the month.

With the Russia-Ukraine conflict raising concern over the future of Europe's gas supply, forwards prices at the continent's benchmark TTF hub were on the rise, keeping pressure on global gas indices.

In recent trading, winter 2022-23 forward prices at the Dutch TTF strengthened to around $30/MMBtu. Northeast Asia's benchmark JKM index moved even higher, climbing into the mid-$30/MMBtu range. On March 1, the winter 2022-23 forward price was down about $5 to $32/MMBtu.

LNG imports

So far this winter, the Everett terminal in Boston imported five LNG cargoes carrying a total 14.6 Bcf of gas equivalent. On March 1, preliminary data from S&P Global's cFlow trade-flow analytics software showed another laden LNG vessel, the Methane Lydon Volney, approaching Boston.

Based on historical precedent, the Everett terminal could require one to two additional cargoes this season to meet regional heating demand over the remainder of winter. During the 2020-2021 winter season, Everett imported the LNG equivalent of about 17.6 Bcf from November to March. In the two winter seasons prior, the terminal received about 23.5 Bcf over the same five-month period.

High prices in New England's gas market this winter, required to attract sufficient LNG supply, have at times put pressure on prices at other Northeast hubs, especially those along the Upper Atlantic Seaboard.

At Transco Zone 6 New York, January 2022 forwards climbed to over $12/MMBtu this past fall due partly to strong price pressure in neighboring New England. In late January, cash prices at the New York metro-area hub briefly traded at over $20 as temperatures in cities across the Northeast plunged into the teens and single digits Fahrenheit, pushing regional demand to the upper-30 Bcf/d range — on par with previous winter-season highs, data from S&P Global showed.

Over the past five weeks, the January 2023 forward gas price at Transco Zone 6 New York only gained about 10%, rising to the upper $8/MMBtu range, but it could come under additional pressure, assuming winter prices in New England continue to rise.