Will Nexus oversupply the Midwest?

The Nexus Pipeline commenced operation on October 13th with initial flows at less than 0.4 bcfd against a design capacity of 1.5 bcfd. Proposed back in July 2014, Nexus is the last Northeast de-bottlenecking project that targets the Midwest, as the remaining Northeast projects will focus on the eastern seaboard markets. As with its predecessors, the start-up of Nexus will impact flows on other competing pipelines, and regional basis should continue to improve with more takeaway capacity. But more importantly, more than 6 bcfd of new pipeline capacity will have been added to the Midwest since October 2017, putting significant price pressure to a region that is already well supplied from all directions. Despite higher Northeast supplies coming into the region, we believe the basis for the Midwest will stay relatively stable for next three to five years due to a combination of increased local demand and a clearing of surplus gas to the growing southern markets.