Northeast, West Coast Premiums Continue to Fade as Other Natural Gas Forward Hubs Advance

For much of the Lower 48, regional natural gas prices gained during the Dec. 21-27 trading period amid hopes for a chillier new year, though winter basis premiums continued to fade, NGI’s Forward Look data show.

January fixed prices at Henry Hub rallied 17.7 cents to exit the period at $2.629/MMBtu. February finished at $2.458, up 9.9 cents.

Continuing themes from the week-earlier period, winter basis premiums came down sharply for hubs in the West and the Northeast, even as fixed prices advanced for much of the rest of the Lower 48.

Northeast Premiums Fade

January basis at Transco Zone 6 NY fell 32.5 cents to end at plus-$2.159. Farther upstream, Texas Eastern M-3, Delivery tumbled 32.0 cents for January, ending at plus-$1.394.

Updated forecasting from Maxar’s Weather Desk Thursday showed warmer-leaning temperatures blanketing the Lower 48’s northeastern quadrant well into the new year.

The latest 11- to 15-day outlook shifted slightly warmer day/day for the eastern half of the country, with colder adjustments for the western half, the forecaster said. For the six- to 10-day period, Maxar called for “unsettled” conditions over the southern Lower 48.

“The storm track favors the Southern Tier, with the first low pressure tracking along the Gulf Coast from early to mid-period and the second from California on days seven to eight to the Gulf Coast late,” Maxar said. “Temperatures are coolest in the wake of these lows, falling slightly below normal.

“Alternatively, the period is forecast to be drier than normal across the Northern Half, and this region is forecast with above normal temperatures.”

Mid-Atlantic Hubs Climb

While Northeast demand hubs shed value for the period, it was a different story nearby in the Mid-Atlantic. The cooler-leaning temperatures farther south, alongside signs of pipeline congestion, saw basis premiums climb at Transco Zone 5 and Cove Point for January.

Transco (aka Transcontinental Gas Pipe Line) put an operational flow order (OFO) into effect for Zones 4, 5 and 6 during the Dec. 21-27 trading period because of “limited flexibility to manage imbalances” on its system. A subsequent OFO was scheduled to go into effect Friday and last until further notice.

One factor potentially impacting pricing dynamics along the East Coast this winter has been the partial startup of Transco’s Regional Energy Access expansion, which has helped to narrow the spread between Transco-Leidy Line and Transco Zone 6 non-NY.

Recent winter forward price trends reflect this dynamic, with Transco Zone 6 non-NY premiums under heavy downward pressure for January and February during the Dec. 21-27 period. By contrast, Transco-Leidy Line basis held steady week/week at a roughly 40-50 cent discount to Henry Hub.

West Coast Cushion

Over on the West Coast, Malin January basis sank to plus-$1.063, down 41.2 cents week/week. Farther south, SoCal Citygate dropped 42.5 cents to finish at plus-$1.570 for January.

Spot prices in the sometimes volatile Southern California market have been subdued for the current winter, especially when compared to price spikes observed in December 2022.

SoCal Citygate day-ahead trades largely failed to crack the $3 mark during the Dec. 21-27 period, Daily GPI historical data show. 

At this time a year ago, the hub saw spot trades soar above $50. However, this winter, the region has clearly thus far not experienced the same confluence of factors that drove sustained price spikes and depleted regional storage inventories a year ago. 

According to the U.S. Energy Information Administration (EIA), Pacific region storage stood at 280 Bcf as of Dec. 22, an 18.6% cushion versus the five-year average. In the year-earlier period, Pacific stocks totaled just 168 Bcf, according to the agency.

Futures Foothold

Nymex futures continued to gain a foothold following a second straight bullish-leaning result in the latest EIA Lower 48 storage statistics. 

The February Nymex contract rallied 12.0 cents to settle at $2.557 Thursday. That mirrored a 12.5-cent front-month rally a week earlier after EIA’s print for the period ended Dec. 15 also landed on the bullish side of expectations.

The reported 87 Bcf withdrawal from domestic inventories for the week ended Dec. 22 implied 1.9 Bcf/d of tightness versus the prior five-year average when compared to degree days and normal seasonality, according to Wood Mackenzie analyst Eric McGuire.

“For the second week in a row, EIA reported a withdrawal of 87 Bcf,” McGuire said. “While temps were slightly milder week/week, the corresponding loss of heating demand was completely offset by higher power burns, slightly higher LNG exports and a small week/week decline in production.”

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