New York is becoming boring, at least in natural gas prices

New York was king again for a fleeting moment Monday, when the spot natural gas price for Transcontinental Gas Pipe Line zone 6-New York skyrocketed up $5.91 to average $16.61/MMBtu, becoming at that point the highest city-gate price in the US.

Going back at least as far as the beginning of 2003, that NY gas delivery point has typically averaged above the Algonquin Gas Transmission city-gates, a Boston-area point that also trends toward volatility in the winter. But 2012 brought some changes, with Transco zone 6-New York prices moving down the ladder to become closer to the Algonquin prices. On Monday, Transco zone 6-New York achieved a premium of $1.46 — its highest premium of the year — over Algonquin, which averaged $15.15/MMBtu after rising $4.67.

Looking at historical Platts price data, Transco zone 6-New York has averaged higher than Algonquin on the last trading day of the year for seven of the past nine years, so it isn’t totally surprising that Monday brought such a price spike for the point. Market players are squaring their books for the end of the year, there’s often high demand from cold winter weather, and traders are buying gas to use over the holiday.

But then things began returning to the new normal on Wednesday, when Transco zone 6-New York fell steeply (as did other city-gate prices in the Northeast US)  to average $9.85/MMBtu. Algonquin also fell, putting its average at $10.36, but it became the highest price in the US.

The move was a more accurate representation of the markets in the Northeast. Even as overall gas prices for both points have fallen over the past few years, volatility at Transco zone 6-New York has waned (something fellow editor Lettie Vasquez and I discussed here) while Algonquin has continued to see more drastic winter price spikes.

Monday felt, in some ways, like a last grasp at glory by Transco zone 6-New York for 2012. Reviewing price data for the entirety of the year, it’s easy to see just how much the point’s price swings had flattened. The $1.46 spread from the last day of the year is a fraction of the largest spread in 2011, when Transco zone 6-New York’s largest premium over Algonquin was $5.69. In 2010, the largest premium was $5.18; in 2009, the year’s largest premium was $2.93, and in 2008, the premium was $14.49.

We’ve only had one trading day in 2013 thus far, and drawing a conclusion about the year from just one day may seem premature. Much of the winter still lies ahead for the Northeast, and a long, cold season could help pump up the spread between the two points again.

New projects to relieve congestion around city-gates could change price dynamics in the region. Gas prices throughout the nation could leap upward, taking Transco zone 6-New York with them. But when I’m preparing to cover the next winter storm, I’ll probably spend more time preparing myself for chaos at the Algonquin city-gate as more likely than at Transco.


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