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Colder weather, LNG import push reset outlook for New England winter gas prices

The arrival of frigid weather across the US Northeast is fueling a rebound in New England’s forward gas market recently as stronger heating demand drives an uptick in the pace of LNG imports to the region.

Over the past week, population-weighted temperatures in the Northeast have dipped to their coldest yet this winter at an average 31 degrees Fahrenheit. In New England, the weather has been even colder with Boston registering low temperatures at close to 5 degrees in recent days.

Colder weather across the Northeast this month has finally lifted residential-commercial gas demand in the region to more typical winter levels after a slow start to the season in November and December.

Since the start of January, heating demand in the Northeast has jumped to an average 17.1 Bcf/d, narrowly outpacing the five-year average at 16.7 Bcf/d, data from S&P Global Platts Analytics shows.

Stronger demand in the Northeast has fueled a rise in city-gate gas prices across the region with hubs in New York, New Jersey and Massachusetts surging. At Transco Zone 6 New York, cash prices have jumped to over $15/MMBtu this month. At Boston’s Algonquin city-gates location, spot gas has traded at upwards of $26/MMBtu recently, S&P Global Platts data shows.

Rising demand and prices in the Northeast cash markets have prompted a flurry of LNG imports to the Northeast since late December, resetting the outlook for balance-of-winter gas prices in the region.

LNG imports
Since the start of January, Boston’s Everett LNG import terminal has already received two cargoes including the 2.9 Bcf Cadiz Knutsen on Jan. 8 and the 3.1 Bcf Methane Lydon Volney on Jan. 13 – both from Trinidad and Tobago. On Jan. 19, preliminary data showed a third LNG vessel, the 3.2 Bcf Exemplar, nearing either Boston’s Everett or Northeast Gateway terminal, data from Platts cFlow trade-flow analytics software and Platts Analytics showed.

Including an earlier import received at the Everett terminal in November, New England has now taken in four LNG cargoes so far this winter carrying an estimated total of 12.3 Bcf equivalent. Based on historical precedent, the Boston terminal would likely need to import more supply in the weeks ahead to meet balance-of-winter heating requirements – even assuming demand underperforms in February and March.

During the 2020-to-2021 winter season, Everett imported the LNG equivalent about 17.6 Bcf from November to March. Over the same five-month period, the terminal took roughly 23.5 Bcf in both the 2019-to-2020 and 2018-to-2019 winter seasons, Platts Analytics data shows.

With Northeast demand forecast to remain elevated through at least late January, the forward gas market has turned more bullish recently as the region potentially prepares to import significantly more supply.

Forwards
Earlier this week, as Boston was hit with its coldest weather yet this winter, Algonquin’s cash market spiked to nearly $27/MMBtu – only the second time this winter that the cash market has matched peak-winter price expectations seen in the forwards market this past fall.

On Jan. 18, the rising cash price at Algonquin prompted a rebound in the January forwards price – now traded as the balance-of-month gas contract – to over $26.50/MMBtu, nearly double its settlement price just two-weeks prior.

Bullish sentiment for the January gas market has also extended to February, with the late-winter forward contract recently climbing to over $20 – up from lows around $16 at the start of this month, S&P Global Platts’ most recently published M2Ms data shows.
Source: Platts

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