Natural gas dry production at selected points in the United States Rocky Mountain region have rebounded during the final two weeks of January, according to data from BENTEK Energy LLC (Bentek).
Production declines took place in this region during the middle of the month, likely due to the effect of a cold front that moved into the region. The cold weather led to a number of reported wellhead freeze-offs, and correlated with production decreases in the San Juan, Green River, Uinta and Piceance basins, according to Bentek.
This was particularly the case in the San Juan Basin, located in Colorado and New Mexico. There, production levels that had been consistently above 2.5 Bcf/d through October and November 2012 fell below 2.0 Bcf/d from January 14, 2013 through January 16, 2013. Heating degree days in the Mountain region rose to 293 for the week ending on January 17, 2013, a 28.5 percent increase on the 228 heating degree days registered for the week ending on January 10, 2013, according to data from the National Oceanic and Atmospheric Administration (NOAA) Climate Prediction Center. By January 24, 2013, daily production levels at San Juan had climbed back above 2.3 Bcf/d, while only 197 heating degree days were recorded for the week ending on that date. Production in the basin has remained relatively steady since then, as can be seen above.
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Temperatures in the Northeast were in the single digits, but prices were in the 30s. Brutally cold weather helped drive Northeastern prices up at the beginning of the report week. The Northeast United States is somewhat infrastructure constrained and the tight supply-demand balance during extreme cold or heat often leads to price spikes. On Wednesday, January 23, prices at Transcontinental Pipeline’s Zone 6 delivery point, which serves New York City, rose to $35.33 per MMBtu, followed by $37.07 per MMBtu the following day. Prices at the Algonquin Citygate, which serves Boston, also had two days of very high prices, $31.32 per MMBtu on Wednesday, January 23, and $34.59 per MMBtu the next day.
High demand caused Transcontinental Pipeline to issue a system-wide operational flow order on January 24 to correct imbalances. The OFO was lifted the next day. Pipeline imports from Canada helped fill the need for more natural gas. Imports on Wednesday, January 24 and 25 were about 1.7 Bcf/d, almost twice the level at the end of the week when the weather warmed up. Prices began falling Friday, and Northeast prices hit their low for the week on Tuesday (Boston at $4.60 per MMBtu, New York at $3.47 per MMBtu), but expectations of a return of cold weather by the weekend likely contributed to price increases the next day. Even with continued mild temperatures on Wednesday, New York ended the week at $3.99 per MMBtu, while Boston ended at $7.42 per MMBtu.