Northeast Production

As of the weekly EIA natural gas storage report due out today (Thursday) for the week ending February 5, 2016, the U.S. gas inventory surplus is likely to grow to near 600 Bcf above levels at the same time last year. Current weather forecasts suggest the surplus over 2015 will soar to near 800 Bcf by the end of February. With outright inventory levels already exceptionally high, this surplus growth kicks the market’s oversupply problem further down the futures curve – meaning prices could stay lower for longer. Today we look at the winter 2015-16 fundamentals leading to this surplus and what it means for the rest of 2016.

For gas producers in Appalachia, this has not been such a good summer for basis – the price they get for their gas versus the benchmark at Henry Hub, LA.  Basis in the eastern part of the Marcellus has been particularly weak, with negative differentials extending into New York.   Even at some West Virginia points like Dominion South, producers have faced ugly basis for the past few months.  But there are some points that have been relatively immune, including Columbia Gas TCO, which has been hanging in there at pricing pretty close to Henry.  Even when parts of the Dominion South and TCO pipeline systems are on top of each other.  Why are basis differentials in the Appalachian Mountains hopping around all over the place?  Today we look into why some Northeast prices have taken a hit and others have not.