New Pipelines in the Marcellus Dramatically Improved Prices in 2H15

What a difference a few pipelines can make. Last week the U.S. Energy Information Administration (EIA) issued their Natural Gas Weekly report (excellent report, great overview of the industry at large). One of the brief articles included in last week’s EIA update was story about the “basis differentials” for the Marcellus, and how they’ve narrowed. Basis differential means “how much does the gas trading at a given location trade above or below the standard Henry Hub price.” For example, last summer gas trading at Transco’s Leidy Hub in the Marcellus was trading for $1.65 million British Thermal Units (MMBtus) BELOW the Henry Hub price. In December, the gap had narrowed and Transco Leidy Hub prices were, on average, trading around 89 cents/MMBtu below the Henry Hub price. That’s a vast improvement in just six months. Why the narrowing in trade price? New pipelines came online in the latter half of last year, carting Marcellus Shale gas to new markets. More demand (i.e. new markets) equals a bump up in price…

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