Tipping Point -- The Northeast Becomes A Net Gas Supplier To The Rest Of The US -- November 25, 2015

Active rigs:

	11/25/2015	11/25/2014	11/25/2013	11/25/2012	11/25/2011
Active Rigs	65	185	187	183	201

RBN Energy: can the Northeast become a net gas supplier to the US in 2015?

A highly anticipated event in the U.S. natural gas market is when the Northeast region crosses the line from being a net gas taker from, to becoming a net gas supplier to, the rest of the country.

Ever since the Marcellus and Utica shale began ramping up, Northeast production has been on a course to eclipse regional demand. RBN predicted 2015 would be the tipping point when the supply-demand balance would finally reverse on an annual average basis, marking a new phase for Northeast prices and for the U.S. gas market as a whole.

We’ve seen that despite capitulating oil prices, capital budget cuts and lower rig counts, Northeast production has continued to reach new highs in 2015 – beating the record again this past Sunday (November 22,2015) at 20.3 Bcf/d according to Genscape. But regional demand also has been at record high levels. Today with less than two months left in the year, we determine whether the Northeast region will – or already has - crossed the threshold to net supplier in 2015.

Recap

Before the advent of shale gas the Northeast was a major net demand center with relatively small amounts of local supply. In Living in the Fast Forward Curves Part 2 and Part 3, we traced the region’s path to becoming a net supplier of gas to the U.S., triggered by massive growth in regional production from the Marcellus/Utica shales. As local production grew it gradually pushed out inbound flows from other regions, with more of the displacement occurring in the summer when Northeast gas demand is lower.

Over the last couple of years we’ve seen Northeast gas seeping out of the region for a few months of the year, mostly via backhaul capacity on pipelines that used to bring gas in. The ability to serve local demand by displacing external supply sources and the availability of some backhaul capacity to facilitate outflows provided a cushion for production to grow while the region awaited increased takeaway capacity to send more gas out of the region. Starting this year, we expected production to outstrip both local demand and takeaway capacity, not just for a few months but for most of the year, leading to the lowest prices yet for the region. That marks the beginning of a new, extremely constrained phase in the Northeast’s transformation in which excess supply is trapped in the region, presenting all sorts of challenges for midstream operators and market prices.

*******************

Jobs

Bloomberg Business is reporting:

• first-time claims dropped 12,000 to 260,000
• much better than forecast of 270,000
• previous reporting period revised upward to 272,000
• the record low since 1973 was 255,000 in mid-July
• four-week average held at 271,000

*********************

EIA Daily Energy Cookie

Energy "cookie":

U.S. retail regular-grade gasoline prices continue to decline, averaging $2.09 per gallon as of November 23, 73 cents lower than this time last year and the lowest heading into a Thanksgiving holiday weekend since 2008. --- EIA 

It would be interesting what the average price would be if one took out California, Alaska, and Hawaii.  Here in Texas, if one can't find gasoline for less than $1.90/gallon, one isn't looking.

************************

Weekly Natural Gas Fill Rate / Gasoline Demand

Natural gas fill rate (dynamic link): 9

Stocks were 554 Bcf higher than last year at this time and 252 Bcf above the five-year average of 3,757 Bcf. At 4,009 Bcf, total working gas is above the five-year historical range.

Gasoline demand (dynamic link): dropped slightly; very surprising; gap between this year/last year narrows significantly; not expected when jobless claims plummeted, price of gasoline really, really cheap, etc. See graph: