You've Got Your Troubles - Is the Northeast Gas Market Headed for a Fall Meltdown?

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U.S. Northeast natural gas production has surged nearly 1.5 Bcf/d in the past four weeks as wells that were shut-in this spring came back to life. The supply gains have been matched by strong intraregional demand, which has posted at or near record highs on a monthly average basis in recent months. But the returning supply volumes raise the question: what happens when summer cooling demand begins to fade? Storage will only be able to absorb so much, as regional storage inventories are already well above year-ago levels and the historical average for this time of year. That leaves flows out of the region as the only other outlet for excess supply, and those may be limited as well, as pipeline issues and drastically reduced downstream demand from LNG exports have stymied outflows. So, is the Northeast gas market headed for a shoulder-season meltdown? Appalachian gas supply prices this month already have weakened relative to the national benchmark Henry Hub, and these dynamics suggest there is more tumult ahead. Today, we consider what’s in store for the Northeast gas market this fall given the latest fundamentals.

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