Short-term NYMEX natural gas prices are lacking support, despite the widening storage deficit and production interruptions spurred by wintry weather. As temperatures rise and outages drop moving into summer, Northeast year-on-year production growth is set to rise above 3 bcfd.
The now debottlenecked Northeast region has experienced tighter basis prices, with Dominion South Point and TGP Zone 4 300 bases maintaining a narrow $0.15/$0.20/mmbtu discount to Henry Hub in February.
The struggle of Northeast pipeline takeaway capacity constraints is now a thing of the past. After 2017's lack of pipeline space softened basis prices, gas producers overbooked capacity while positioning for long-term growth. With lower-than-anticipated production growth in winter months, the new pipeline capacity remains under-utilised. Both factors have firmed up in-basin prices.
New Northeast pipeline start-ups also pushed November 2018 gas production to a new record high, according to Energy Information Administration figures. So far in Q1, seasonal weather and maintenance/outage events have reduced pipeline flows, signalling lower production levels. We expect the production trajectory to turn around with warmer weather.
We see total US storage levels flattish year-over-year for March, with a flip from deficit to surplus emerging later this month. In the medium term, we've raised our forward price forecast slightly as softer production growth coupled with higher-than-expected power demand.
For more granular details of our price outlook, see the North America Gas Short-Term Outlook. This monthly report is released just before Bid Week, with crucial fundamentals analysis and forecasts around power demand, LNG exports and supply. Contact us to learn more about our North America Gas Service.