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The Rockies Need More Pipe

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The Daley Note: November 3, 2023

An early season cold front sent natural gas prices surging this week in western US markets. The price action was notable in the Rockies, where regional prices diverged as temperatures fell at the end of October. 


Spot prices in the Pacific Northwest surged over $6/MMBtu early in the week as a cold front descended into the region from Canada. Prices at the Sumas, WA point traded at a high of $6.31 on Monday (October 30). Prices also topped $6 at the Malin, OR border to California.


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Rockies prices moved in different directions amid the higher regional demand. The spread between the Opal and Cheyenne hubs widened to $2.64/MMBtu on October 30, in what could be an early taste of volatility similar to last winter. The Opal-Cheyenne spread averaged as high as $11.67 in January 2023, when tight market conditions on the West Coast pulled Opal prices higher (see figure). 


The West Coast has been intermittently short natural gas supply for the last few years, leading to a wide spread between prices on the eastern and western side of the Rocky Mountains. While there is sufficient capacity to bring gas to the Wamsutter area on pipelines like Rockies Express (REX), there is not enough capacity to move gas further west to the Opal hub in southwestern Wyoming.


Opal has connectivity to the Southern California market via the Kern River Pipeline and to the Pacific Northwest from Williams’ (WMB) Northwest Pipeline. This connectivity causes the hub to trade at a premium when prices are high on the West Coast, while Cheyenne can miss out. The constraint should be loosened in 2026 when WMB plans to complete a 325 MMcf/d expansion of Overthrust Pipeline


East Daley is monitoring western gas markets through our West Coast Supply and Demand Forecast. Launching next month, this new report provides an in-depth view into supply, demand and flow dynamics affecting prices in the West. Reach out for more information on the West Coast Supply and Demand Forecast.  – Alex Gafford Tickers: WMB.



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