The Energy Information Administration (EIA) has an interesting article addressing natural gas pricing volatility in New England and potential solutions: “During the past two winters, New England natural gas winter prices have risen significantly. The average bidweek natural gas price reached a high of $14.52 per million British thermal units (MMBtu) for December 2013 and more than $20/MMBtu for January 2014. The January New England forward basis1, reflecting the relationship between market conditions at a specified regional hub and those at Louisiana’s Henry Hub, settled at $17.41,2 and the forward basis curves indicate a market expectation of a record-high winter basis (Figure 1). The high winter prices in New England suggest a natural gas delivery system that is stretched significantly.”
What should be done? “With rising natural gas output from the Marcellus production field, pipeline expansion to move this gas to New England is one option for alleviating market stress. The key is to deliver more natural gas to Massachusetts, especially the Boston area, because it is the largest market in New England.”
Read it all.