Supplies of natural gas in storage are stout everywhere, but East region inventories are closer to historical norms than any other section of the Lower 48.
Should the densely populated Northeast sizzle amid scorching temperatures as forecast this summer, utilities in the heavy-gas consuming corner of the country could burn through more gas in the coming months and have less to inject into underground stockpiles. That could trim supply excesses relative to past years and bolster prices.
Spot prices in the Northeast and neighboring areas are often volatile in peak demand periods, bouncing higher when there are demand surges or supply interruptions. On Friday, NGI’s Northeast Regional Avg. clocked in at $1.235/MMBtu – low but notably above the National Avg. of 95.5 cents.
“Also helping are continued discipline and maintenance mode from Appalachia producers,” as well as the pending start-up of the Mountain Valley Pipeline, “which should happen by late May,” said NGI’s Pat Rau, director of Strategy and Research. “We believe EQT Corp. has been holding off 1 Bcf/d of production until that goes into service, which leaves another 1 Bcf/d of net capacity that could serve as an outlet for local supply instead of just injecting that into the ground.”
Following a 29 Bcf injection, stocks in the East totaled 408 Bcf for the week ended April 19. This put storage levels in the region 7% above the year-earlier level and 28% ahead of the five-year average, according to the U.S. Energy Information Administration (EIA).
Still, the East figures were lower than any other region. The national tally of storage – 2,425 Bcf – was 22% above the comparable period of 2023 and 37% higher than the average of the previous five years.
The oversupplied market developed following record production late in 2023 and early this year that intersected with mild winter weather and soft heating demand.
“There will be no sustainable rally in natty until we see a material retracement in the year/year surplus in storage,” analysts at The Schork Report said.
That noted, a recent summer outlook from the National Weather Service called for above-average temperatures across nearly every part of the Lower 48. Notably, record or near-record heat could stretch from Texas to the Northeast, with major markets along the East Coast poised to bake this summer.
At the same time, multiple major exploration and production (E&P) companies have scaled back activity over the past two months, collectively reducing output from all-time highs around 107 Bcf/d early this year to around 99 Bcf/d over the past week, according to Wood Mackenzie data.
EQT, the largest U.S. producer, recently extended a production curtailment of 1 Bcf/d through May, as Rau noted.
Appalachian pure-play EQT first eased production in February. It drove a 30-35 Bcfe reduction in first quarter volumes. The company said the cuts could extend beyond May, depending on market conditions such as any MVP delay, potentially helping to keep eastern supplies lower as summer weather heats up.
Like cash prices, Henry Hub futures have struggled to find momentum this spring, with the May contract consistently hovering below the $2.00 level as spring weather failed to galvanize demand. But with summer nearing and “widespread gas production curtailments,” Rystad Energy analyst Kaushal Ramesh said prices have likely bottomed out and are poised to climb with any jumps in demand.
Tudor, Pickering, Holt & Co. analyst Matt Portillo said he expects domestic production to hold at around 99 Bcf/d in the near term, including the continued EQT curtailment.
“On the demand side, power remains consistent week/week, with our forecasts now adjusted for the incremental demand we see coming from increased data center build outs; we’ve added 0.15 Bcf/d to 2024, bringing our full year power forecast to 35.16 Bcf/d,” Portillo said. He referred to the proliferation of artificial intelligence and the energy-intensive data centers needed to support it.
With those bullish factors in mind, Portillo is looking for a 54 Bcf national build in the next EIA storage report. That would compare to the five-year average increase of 72 Bcf.
Early estimates for the week ended April 26 submitted to Reuters ranged from an injection of 42 Bcf to 85 Bcf, with an average increase of 47 Bcf.
