You've Got Your Troubles, Part 4 - More Northeast Gas Production Curtailments

U.S. natural gas production in recent days has plunged more than 3 Bcf/d. While some Gulf of Mexico offshore and Gulf Coast production is still offline from the recent tropical storms, the bulk of these declines are happening in the Northeast, where gas production has dived 2 Bcf/d in the past week or so to about 30.2 Bcf/d, the lowest level since May 2019, pipeline flow data shows. Appalachia’s gas output was already down earlier in the month, as EQT Corp. shut in some volumes starting September 1. But with storage inventories soaring near five-year highs, a combination of maintenance events and demand constraints are forcing further curtailments of Marcellus/Utica volumes near-term. Today, we provide an update of Appalachia gas supply trends using daily gas pipeline flow data.

As we discussed on Wednesday in Part 3 of this blog series, the Northeast gas market has been volatile lately. Appalachian supply prices in the spot market earlier this week fell to three-year lows, despite production shut-ins being in effect. A confluence of factors influenced the downturn, including low weather-driven demand, pipeline outages that are restricting outflows, and the start of an annual fall maintenance event at Dominion Energy’s Cove Point LNG facility that took another 700 MMcf/d or so of export demand out of the market. What’s making all of that worse is that storage levels are soaring, not just in the Northeast but also in downstream markets, reducing flexibility to navigate supply congestion and forcing production curtailments. In the past couple of days, cash prices have strengthened again as production has pulled back.

We’re going to delve into the specifics of the latest production pullback using daily pipeline flow data from our good friends at Genscape next. Before we get into the production trends, though, let’s first review a bit about the data itself. The pipeline flow dataset comprises the daily gas volumes nominated by market participants to either be received or delivered at thousands of individual meters along natural gas interstate pipelines across the U.S. The meter volumes are then aggregated by type of connecting facility (i.e., gathering systems and processing plants that represent production, and power plants, industrial plants or distribution companies that represent demand); these pipeline flows provide critical insights into supply and demand trends on a daily basis. How much of the market flow this data captures can vary widely by region, but in the Northeast, it provides a high degree (~95%) of transparency into the region’s supply and demand picture. However, note that initial volumes for the most recent gas day can get revised based on final nominations reported for that day. The data discussed in today’s blog is as of the evening cycle for gas day Thursday, September 24. (See Sooner or Later and One Step Closer for more on flow data. We’ll also be demonstrating how to use flow data to track the Northeast gas market in our upcoming School of Energy Virtual on October 20-21, 2020.)

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