Highlights
Eastern Gas South falls to $1.30 discount to Henry Hub
Northeast power burn, res-comm hit seasonal lows
Cove Point annual maintenance likely to last 3 weeks
Basis prices in Appalachia are down sharply this week and could fall further in the days ahead as the demand-weakening effect of cooler weather in the US Northeast is further magnified by the recent startup of annual maintenance at the Cove Point LNG export terminal.
On Sept. 21, cash basis at Eastern Gas South, formerly known as Dominion South, settled at a $1.15 discount to the Henry Hub – down from a month-to-date average discount of just 76 cents. In Sept. 22 trading, basis prices at the Appalachian benchmark were down another 15 cents to minus $1.30/MMBtu, data from S&P Global Platts and the Intercontinental Exchange showed.
Typical from late September to early October, the decline in basis prices across Appalachia comes as population-weighted temperatures in the Northeast dip to the upper-60s to low-70s Fahrenheit – a range sufficiently mild to keep both cooling and heating demand near seasonal lows.
On Sept. 22, regional power burn was estimated at just 8.6 Bcf/d, down from late-August levels at over 12 Bcf/d. Residential-commercial demand was hovering around 3.6 Bcf/d, up just 500 to 600 MMcf/d from its summer-season lows, S&P Global Platts Analytics data shows.
The recent weather-related decline in demand has been exacerbated by the startup of annual maintenance at the Northeast region’s only LNG export terminal, Cove Point, on Sept. 20. With feedgas consumption at the terminal zeroed out, the Northeast has simultaneously lost about 700 MMcf/d in export demand.
Forecasts, price outlook
Over the next two weeks, the Northeast population-weighted temperature is forecast to dip further to the mid- to low-60s F, dragging down demand along with it. By the weekend, regional demand should bottom out at just 13.9 Bcf/d, down from about 15.3 Bcf/d on Sept. 23, according to Platts Analytics.
At Cove Point, meanwhile, the annual turnaround and comprehensive inspection started Sept. 20 is expected to last three weeks, at par with prior annual maintenances carried out around this same time in 2018, 2019 and 2020. The extended outage will likely add to the basis price dislocation at Appalachia’s upstream hubs.
In autumn seasons past, cash prices at Eastern Gas South have traded at alarmingly steep discounts. In recent history, the largest such discount was recorded in October 2020 when the Appalachian benchmark traded at just 67 cents – more than $2.20/MMBtu below the Henry Hub.
While outright cash prices in Appalachia are unlikely to dip below $2 to $3 this year, the region’s basis price dislocation could be equally severe to 2020, depending on Northeast weather and demand trends.
On the forwards market, the balance-of-month contract at Eastern Gas settled Sept. 21 at $3.54/MMBtu – a $1.30 discount to the Henry Hub, S&P Global Platts’ most recently published M2MS data shows.
Author
J Robinson
Editor
Gary Gentile
Commodity
LNG,
Natural Gas
Source: Platts
