Households in the Northeast and Midwest can expect to pay nearly 30% more for natural gas during the upcoming winter compared to last year, the U.S. Energy Information Administration (EIA) said Oct. 13 in its “Winter Fuels Outlook.”
The lack of an El Niño warming weather pattern like that in 2015-2016 will lift national consumption by about 10% in the period from October 2016 to March 2017, the EIA said. Winter gas prices are expected to be the highest since 2010-2011 at an average $10.37 per thousand cubic foot (Mcf), or 11% more than last winter.
Nationally, residences are expected to experience gas bills that are 22.4% higher than last year. Consumption in both the Northeast and Midwest is anticipated to rise by more than 13%. The increase is tied to the expectation that 2016-2017 will be a typical winter, unlike last year’s warm season.
Citing data from the National Oceanic and Atmospheric Administration (NOAA), the EIA said it expects a much colder winter east of the Rockies, with temperatures 17% lower in the Northeast and Midwest, and 18% colder in the South. However, temperatures in the eastern U.S. will still be about 3% warmer than the average of the five winters that preceded 2015-2016. Temperatures in the western U.S. will likely be 2% warmer than last year.
EIA anticipates an average Henry Hub spot price of $3.16 per million British thermal unit (MMBtu), which is 53% higher than last year. The Henry Hub price on Oct. 13 was $3.34/MMBtu.
Storage entering the heating season—the end of October—is expected to be 3.966 Tcf, which would be close to a record high, the EIA said. In the week ending Oct. 7, the total was up to 3.759 Tcf.
These high stock levels should help moderate price volatility in the case of a colder-than-expected winter. The EIA expects storage at the end of the season to total 1.896 Tcf.
The expected November startup of Spectra Energy Corp.’s (NYSE: SE) Algonquin Incremental Market (AIM) Project, which will move up to 342 MMBtu/d of natural gas from Pennsylvania to multiple points in the Northeast, could lower the price of gas in Boston by as much as $1/MMBtu during peak winter months, EIA forecasts.
It noted, however, that pipeline constraints in the Northeast will still result in a price differential between the region and the Henry Hub benchmark price. During times of extremely cold temperatures, the constraints could contribute to price volatility.
The EIA also said that it expects the 5% of households that heat with propane to spend 1.4% less this winter, which would be less than in eight of the past 10 winters. Propane prices tracked by Hart Energy are up between 18% and 20% at the major hubs of Mont Belvieu, Texas, and Conway, Kan., over last year at this time.
Joseph Markman can be reached at jmarkman@hartenergy.com or @JHMarkman.
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