Let the Sky Fall - From $200/MMBtu to $1/MMBtu Gas, PNW Market Volatility Continues

Three months ago, the Pacific Northwest natural gas market recorded the highest trade in U.S. spot gas price history. The region at the time was dealing with extreme winter heating demand, a pipeline outage that limited access to gas supply and storage deliverability issues –– all of which were compounding constraints in the power markets. The result was a feeding frenzy that led gas prices to skyrocket to as much as $200/MMBtu at the Sumas, WA, hub on March 1. Fast forward to today — prices there have crumbled, falling to as low as $0.80/MMBtu in trading last week. Winter demand has dissipated, pipeline and storage constraints have eased, and the region is now dealing with an entirely different — even opposite — set of problems. Today, we take a closer look at the factors behind these latest price moves.

In our recent Living in the Wild, Wild West blog, we stated that the winter 2018-19 natural gas market was one of the most chaotic in recent memory, with the NYMEX Henry Hub futures contract swinging from nearly $5/MMBtu in November 2018 to less than $2.60/MMBtu a few months later. The physical market also posted both the highest and lowest spot trades ever seen in the U.S.: the $200/MMBtu at Sumas, WA, (again, on March 1) and a negative-$9.00/MMBtu at Waha in the Permian on April 4. We said in that blog that there’s likely to be more volatility ahead and neither of these hubs has disappointed in that department. A couple of weeks ago in Sitting, Waiting, Wishing, we looked at the ongoing turmoil in the Waha market, which, after recovering from record low, negative prices and treading above zero earlier in May, again plunged into negative territory in the last week of May. The Sumas market too has seen its share of angst in recent weeks, which is the focus of today’s discussion.

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The trouble in the Pacific Northwest (PNW) gas market started last fall, when, on October 9, 2018, a rupture on Enbridge’s Westcoast Energy/BC Pipeline system disrupted Canadian gas exports to Washington State at the Sumas border interconnect with Williams’s Northwest Pipeline (NWPL) — one of only a few routes available to move gas supply into the PNW (see Chain Reaction). Enbridge restored service soon thereafter but at a reduced operating pressure, and flows across the border to Sumas have largely remained below year-ago levels. Months of integrity testing on the Westcoast system followed, resulting in prolonged reductions in deliveries to NWPL at Sumas.

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About the song

"Skyfall" was written by Adele Atkins and her producer Paul Epworth for Adele's performance of the theme song for the James Bond film of the same name. It was recorded at Abbey Road in London and released as a single in October 2012. The recording was going for the feel and groove of Shirley Bassey's hit singles for earlier Bond movies such as “Goldfinger,” “Diamonds Are Forever” and “Moonraker.” The single does not appear on the soundtrack album, but entered the Billboard Hot 100 chart at #8, making it the first Adele song to debut in the Top 10, and the first James Bond theme song to debut in the Top 10. It has been certified 2x Platinum by the Recording Industry Association of America and has sold over 7 million copies worldwide, making it one of the best-selling digital singles ever. The lushly orchestrated song went on to win an Academy Award, a Critics Choice Award, a Brit Award and a Golden Globe Award. Adele performed the song live for the first time at the 85th annual Academy Awards in 2013. Personnel on the record were: Adele (lead and background vocals), James Reid (guitar), Tom Herbert (bass), Nikolaj Torp Larsen (piano), Leo Taylor (drums), Paul Epworth (percussion), Jenny O'Grady (choirmaster), Metro Voices (choir) and J.A.C. Redford (orchestration and conductor).

Adele (Adele Laurie Blue Atkins) is an English singer-songwriter. She has made three studio albums, two EPs and 16 singles to date. She has sold over 40 million albums and 50 million singles worldwide. She has won one Academy Award, five American Music Awards, 18 BMI Awards, nine Brit Awards, one Critics’ Choice Award, one Golden Globe Award, 13 Grammy Awards, three Ivor Novello Awards, three MTV Video Music Awards and one NME Award. Adele is currently working on her fourth studio album, with a planned release date of December 2019.

Baby I Need Your (Gas) - Sumas Gas Prices Set U.S. Record As Arctic Blast Descends

Author Sheetal Nasta

Natural gas spot prices at Sumas, WA, on Friday went as high as $200/MMBtu, a record price not only for the Pacific Northwest spot gas market, but for the U.S. That level surpassed even the highest price seen in the premium Northeast market in the pre-Shale Era. Other Western prices also rose Friday but not to anywhere near Sumas, with intraday highs at the other hubs mostly staying below $10/MMBtu. This is just the latest instance of turmoil in the Pacific Northwest gas market since last fall, when a rupture on Enbridge’s Westcoast Energy/BC Pipeline system (on October 9) disrupted Canadian gas exports to Washington State at the Sumas border crossing point. Ongoing testing on the Westcoast system and the resulting capacity reductions for deliveries to Sumas, along with reduced deliverability at the region’s largest storage facility, Jackson Prairie, over the past month have made the Pacific Northwest more of a demand “island” than ever, especially as those issues coincide with this week’s polar-vortex weather. Sumas prices for today’s flows re-entered the stratosphere, averaging just under $16/MMBtu, but remained the highest price in the country. Today, we review the market conditions contributing to the sky-high prices.

Tue 11/20/18 - Blog

Natural Gas

Chain Reaction - BC Pipeline Outage Disrupts Western U.S. Winter Gas Prices and Flows

Author Sheetal Nasta

Natural gas markets in the U.S. Northwest have been in turmoil ever since a rupture on Enbridge’s BC Pipeline system over a month ago (on October 9) disrupted Canadian gas exports to Washington State at the Sumas border crossing point. Service on the affected line has been restored but at a reduced operating pressure for now, and Canadian gas deliveries to Sumas remain at about half of their pre-outage levels, creating supply shortages in the region. Spot natural gas prices at the Sumas, WA, trading hub have been volatile, soaring well above Henry Hub and rocketing to a record outright price of nearly $70/MMBtu late last week. The outage has reverberated across the Western U.S. gas market, sending regional prices reeling as gas flows adjusted to help offset supply shortages. Today, we examine the knock-on market effects of the outage on Western gas flows and prices, and potential implications for the winter gas market.

Mon 12/16/19 - Blog

Natural Gas

Out of the Woods - Pacific Northwest Gas Supply Route Returns Full Force

Author Christie Moffat

After more than a year of reduced natural gas flows, inspections and integrity checks, Enbridge's Westcoast Energy/BC Pipeline system in British Columbia returned its T-South segment to normal operating pressure, effective December 1, ending 13 months of restricted exports of Western Canadian gas supplies to the U.S. Pacific Northwest gas market. The outage and the resulting reduction in export flows out of Western Canada had prolonged effects on local and downstream gas flows and prices, including a run-up in prices at the Sumas, WA, border crossing point to an all-time U.S. record high of $200/MMBtu last winter. Today, we provide an update on Westcoast flows and their downstream impacts.

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