Energy Market Update: September 18, 2018

Natural Gas Prices

Today, we’re looking at Natural Gas Basis prices. Remember: the basis price is simply the differential between the price of gas at a given location and the Henry Hub (H.H.) price. In some cases it will be positive (meaning that prices are more expensive than H.H.); in other cases it will be negative (cheaper than the H.H. price).

The numbers we’ll discuss today are wholesale unless otherwise noted (e.g., citygate) and are for informational purposes only.

Natural gas storage is critical to regions which experience cold winters. Storage levels in 2018 remain low. We are now seeing the lowest levels of the last 10 years, but a 15-year-low is possible if current trends persist. For this reason, risk premiums are present in many basis markets.

Watch more of Tim's analysis by clicking play below:

Algonquin - New England, New York, New Jersey

Q1 2019 forecasts are at one-year highs in many of the Eastern states. Algonquin in particular is predicting high base prices for 2019, 2020 and even 2021.

Transco Zones

Zone 6 - New York

Risk Premiums are high here, too. Forecasts through 2021 are elevated, possibly due to the low storage numbers

Zone 6 - Non-New York

Risk premiums are present here, but do not extend much past 2019.

Zone 5 - Mid-Atlantic

This region includes North Carolina, the largest gas consumer on the Transco system. We see a one-year-high here, as well as elevated prices through 2021 thanks to risk premiums.

M3 - Texas Eastern

Risk premiums are present here, but do not extend much past 2019.

TCO Columbia Gas - Eastern/Midwest

Numbers are better here than in the far Eastern states; we see fewer one-year-highs and manageable numbers through at least 2020.

Dominion South Point - Pennsylvania

Numbers are also better here relative to the Northeast.

Michigan

Michigan and Chicago are incorporating risk premiums into their basis prices, despite the expected effect of the new Rover pipeline. The pipeline will bring substantial amounts of shale gas into the region from Ohio, West Virginia and Western Pennsylvania. However, forecasts remain high, potentially in response to low storage levels.

Chicago

See “Michigan”, above.

PGE Citygate - California

Numbers are elevated here. Though companies are making ambitious commitments to renewable energy in cooperation with California state initiatives, the long timelines of most renewable projects mean that traditional energy sources (including gas) will continue to play a major role in the short-term. The result is that the basis markets here also respond to risk premiums.

SoCal Citygate

See “PGE Citygate”, above.

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