Weak Northeast demand has caused price spreads to Gulf Coast supply centers to narrow so much this month that shippers often cannot cover transport costs, analysts and traders say.
BENTEK Energy analyst Mark Chung said variable costs of transportation from the Southeast are running about 40 cents/MMBtu on major eastbound pipes, including Tennessee Gas Pipeline, Transcontinental Gas Pipe Line and Texas Eastern Transmission.
Exactly when consuming region demand will kick in is largely dependent on weather. “The Northeast winter isn’t looking too good with El Nino conditions, so that would essentially leave more gas in the Southeast/Gulf Coast” and further pressure Henry Hub prices downward, Chung said.
The Midwest is the other area that depends in part on Gulf supply, but that region is unlikely to absorb excess gas either, Chung said.
But even when demand picks up in the Northeast, “take away from Clarington is limited,” Chung said. “Right now REX may not be full, but when there is demand, Clarington will be constrained for sure.”
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