The U.S. Northeast natural gas supply/demand balance has been getting less and less short in recent years due to the onslaught of Marcellus/Utica production, and in 2015 flipped to net long supply for the first time on an annualized basis. That means the 15-state Northeast region as a whole produced more gas in 2015 than it used. Then, in the winter of 2015-16, the region reached another milestone when it ended the season net long supply for the first time. Now regional production may be flattening out and future growth is at risk as takeaway capacity projects face economic and regulatory headwinds. What does that mean for the Northeast balance going forward? Today, we begin a series analyzing the latest fundamental trends in the Northeast gas market.
The last time we looked at the Northeast natural gas supply/demand balance was last November (2015) in I Walk the Line. At the time, we predicted that the Northeast region was likely to end 2015 as a net supplier of gas for the first time on an annual average basis. Until a few years ago the Northeast was a major net demand region with little local supply. The “flip” from net demand to net supply region didn’t happen overnight, of course. Northeast production has been marching toward this milestone since 2010, when the Marcellus Shale became the “next big thing” in the evolution of shale gas production, and the pace picked up in 2013 when the Utica Shale in Ohio joined in the fun. The Northeast supply deficit has been shrinking ever since. While demand has been growing as well, production growth until last year had been far outpacing demand.