Northeast Gas Holds Near $1 as M-2 Stays Below Half Henry Hub

By James Calloway

Northeast gas for Thursday delivery sold for about $1 per MMBtu, while Henry Hub averaged $2.610 on Wednesday, leaving regional benchmarks at less than half the national benchmark.

Henry Hub, the benchmark in Louisiana, averaged $2.610 per million British thermal units, a unit equal to roughly 1,000 cubic feet of gas.

Where did regional gas trade?

The Wednesday snapshot for Thursday delivery showed:

• Texas Eastern M-3, the Mid-Atlantic benchmark, at $1.06.
• Transco Zone 6 NY, the New York City benchmark, at $1.03.
• Algonquin Citygate, the New England benchmark, at $1.31.
• Texas Eastern M-2, the main pricing point for gas produced in southwestern Pennsylvania, West Virginia and Ohio, rose 5 cents to $1.100 on Thursday.

Within that Northeast set, New England held the highest quoted price and New York City the lowest, a spread of 28 cents. Even Algonquin Citygate, at $1.31, stood at only about half the $2.610 Henry Hub average.

The M-2 price moved against the broader weakness, but only slightly. Its 5-cent gain lifted it about 4.8% from an implied $1.05, leaving it $1.51 below Henry Hub, or about 42% of that benchmark. The comparison spans Wednesday's Henry Hub average and Thursday's M-2 price, so it describes the market snapshot rather than a same-day settlement.

For the Marcellus and Utica molecules at the center of the report, location now matters as much as the national benchmark. A seller pricing into Texas Eastern M-2, M-3, Transco Zone 6 or Algonquin Citygate faced quotes near $1 while Henry Hub sat above $2.60.

Why did Northeast gas trade near $1?

NGI's new analysis points to a simple balance: eastern heating demand was "running way behind last year," leaving the region with "more gas than it needs." Weeks of mild fall weather kept consumption below the prior-year level, while available gas exceeded regional needs.

The analysis adds that Canada has stopped sending much gas. That is a change on the supply side, but the report provides no Canadian volume or pipeline figure. The stated price explanation remains the heating-demand shortfall and the resulting regional surplus.

The weakness was not uniform across every northeastern point. New England's $1.31 quote carried a premium of 28 cents to Transco Zone 6's $1.03 and 25 cents to M-3's $1.06. Even so, New England traded at only about 50% of Henry Hub, while New York City traded at about 39% and the Mid-Atlantic at about 41%.

The highest regional price remained $1.51 below the Louisiana benchmark. The key takeaway is that no Northeast benchmark in the snapshot traded near Henry Hub.

What does the gap mean for producers and buyers?

For Marcellus and Utica producers selling into the affected regional pricing points, the immediate commercial issue is the size of the discount. A seller receiving Texas Eastern M-2 would see a 5-cent improvement, but the $1.51 gap to Henry Hub shows that the regional price still carried most of the discount.

The move also shows why a one-day change should not obscure the larger market. A 4.8% increase at M-2 did little to alter the relationship between the regional benchmark and Henry Hub. Buyers at the Northeast delivery points faced quoted commodity prices well below Henry Hub, while sellers remained exposed to roughly 40%-50% of the national benchmark.

These figures do not establish what every Marcellus or Utica producer realized. The report cites hub benchmarks, not individual contracts, production costs or netbacks. They do establish the price environment around the play: regional gas was valued near $1 even as the national benchmark averaged more than twice that amount.

For Northeast buyers, the regional quotes offered gas at well under half the Henry Hub average at the points named. The practical question now is whether stronger heating demand pulls those points back toward Henry Hub or whether continued mild weather and lower Canadian supply keep the surplus in place.

What should operators watch?

The next watch item is eastern heating demand, followed by the pace of Canadian deliveries. A sustained recovery in heating demand would tighten the regional balance; another stretch of mild fall weather would leave more gas than the East needs and keep pressure on local prices.

For producers and buyers, the margin marker is the $1.51 gap between Texas Eastern M-2 and Henry Hub. The key indicators are heating demand, Canadian flows and whether that basis gap narrows.