New York spot prices reaching $46.50/MMBTU
A heavy winter storm roared through New England today, bringing high winds and snowfall to the region. Morning forecasts predicted New York could see snow accumulations of nine inches, and even higher snowfalls in many other major cities.
This storm follows several weeks of cold weather throughout the U.S., which fueled massive natural gas consumption. According to Bloomberg, the U.S. burned 143 Bcf of gas on January 1, the highest single-day consumption ever recorded. The previous record of 142 Bcf was set in early 2014, during the heart of the “polar vortex.”
The high current demand has pushed differentials far above average, especially in New England. The NY Hub, the price of gas to New York on the main TETCO line, averages about $0.24/MMBTU higher than the price of gas at Henry Hub. However, demand in the northeast currently exceeds pipeline capacity, meaning spot prices have skyrocketed. According to Bloomberg, the NY Hub price is currently $46.53/ MMBTU, compared to $2.96 in Henry Hub. This equates to a differential of $43.57/MMBTU, the highest in years. The last time differentials hit these levels was in January 2014, when the polar vortex pushed the NY Hub over $100/MMBTU.
This record demand has translated to inventories, which saw a major decrease in the week. According to the Wall Street Journal, the freezing cold has also disrupted natural gas production, with U.S. output falling from 77.8 Bcf/d to 72.2 Bcf/d.
While these disruptions are local and temporary, they are almost certainly not yet complete. Current forecasts predict colder temperatures in the northeast on Friday and Saturday, so extreme demand and prices are likely to continue into the weekend.
