Northeast natural gas production has been averaging nearly 3.0 Bcf/d higher this year than last year, while demand has lagged behind due to mild weather. At the same time, storage inventories are running well above normal and there is little new takeaway capacity due online this summer. This means the Northeast is under pressure to balance excess supply in the region. In today’s blog, we wrap up our analysis of the Northeast supply/demand balance with a closer look at recent demand trends.
We started this series in Part 1 with a look at the Northeast supply/demand balance (production versus demand) this past winter (November 2015 through March 2016), which marked the first winter that the Northeast was net long supply on a seasonal average basis. All but one month – January 2016 – posted net positive balances (production higher than demand) in the 2015-16 winter. Northeast production in the period averaged about 21 Bcf/d, while regional demand averaged about 19 Bcf/d, leaving the regional balance over 2.0 Bcf/d supply long, compared to a more than 4.0-Bcf/d supply deficit in the winter of 2014-15.
It’s not that we did not see it coming – we have written extensively about the unrelenting production growth in the region and the pipeline reversal and expansion projects to support that growth for some time now. But the fact that production surpassed demand in the dead of winter in one of the biggest winter heating demand markets in the U.S. is a striking reversal of the historical norm and notable for that reason alone. And the winter reversal also occurred earlier than expected thanks to an exceptionally warm start-of-winter period that severely blunted demand. In fact, the market had the double-whammy of extremely mild demand (due to an exceptionally warm season) and higher production compared to the previous year. Winter over winter, Northeast production growth was more modest than it had been in previous winters – about 2.7 Bcf/d – while demand was down nearly 4.0 Bcf/d from the winter of 2014-15.