Spot natural gas prices at Appalachia’s Eastern Gas South hub surged July 6 as regional output recovered from recent upstream outages at two West Virginia gas-processing plants.
During the morning session, cash prices at the regional benchmark location, formerly known as Dominion South, were up about 24 cents from a July 1 low to trade at $2.90/MMBtu, Intercontinental Exchange data showed.The price surge accompanies a 10%, or nearly 3 Bcf/d, increase in Appalachian gas production over the holiday weekend to an estimated 33.4 Bcf/d July 6, according to S&P Global Platts Analytics data.
A media relations representative at Marathon Petroleum confirmed July 6 a resolution to the processing plant outages at its subsidiary company MarkWest Energy’s Sherwood and Mobley gas processing plants in West Virginia.
”On … July 3, repairs were completed safely on the MPLX NGL pipeline at its Majorsville facility in West Virginia,” Marathon Petroleum representative Joe Gannon said July 6 in an emailed statement.
Prior to the holiday weekend, the company said an “upstream operational event” had restricted gas receipts at the two processing plants until repair work on the NGL pipeline could be completed.
Market outlookThe July 6 jump in Appalachian cash prices also accompanies a rise in regional temperatures since the start of July, which has fueled a corresponding uptick in gas-fired cooling. At 81 degrees Fahrenheit, the Northeast population-weighted temperature is now up about 15 F since the start of the month. Over the same period, power burn demand has climbed about 3 Bcf/d to an estimated 10.5 Bcf/d.
For the balance of this week, power burn demand is forecast to ease, dipping to an average 9.9 Bcf/d as regional population-weighted temperatures fall to the mid-70s.
While the brief outage in processing capacity rattled the cash market at Appalachia’s benchmark upstream hub, summer 2021 forwards prices at Eastern Gas South have continued to rise.
At market settlement July 2, the balance-of-month contract settled at $2.83/MMBtu—up 8 cents, or about 3%, after rolling to a July expiration June 29. The August, September, and October contracts have shown even more momentum recently, rising 16 cents, 13 cents, and 11 cents, respectively, over the same four-day period, according to S&P Global Platts’ most recently published M2MS data.