Appalachia Basis in 2021 Is Losing When Henry Hub Rises

June 12, 2020
Share
Print Friendly, PDF & Email

Higher NYMEX prices have led to weakened basis, likely because of anticipated production growth.

Cal ’21 Dominion South basis has traded in a high negative correlation with Cal ’21 NYMEX Natural Gas all year. That basis market is behaving like small increases in production would lead to some problems with outbound capacity.

.

Dominion South basis rose to almost -$0.40 when NYMEX was at its lowest.
Recent gains in DomS have bucked the correlation trend with NG.

DomS Cal ’21 basis reached its recent high near a -$0.40/MMBtu discount to Henry Hub when the NYMEX Cal ’21 gas strip dipped into the $2.30’s. But, as NG rose over $2.70, DomS gave up over a dime, bouncing off its weakest level of the year at -$0.52.

The DomS basis market can become weaker if there is a threat of too much production. Local gas in Appalachia serves local demand, but it must find an exit (or go into storage) if there is too much excess gas.

If this pattern between DomS and NG continues, dips in NG price could be good opportunities to add basis hedges.

We continue to monitor oil, gas, NGLs, and regional markets for hedging opportunities. To learn more and see AEGIS opinion and recommendations, go to AEGIS View publications, or contact info@aegis-energy.com. Like what you see? Share this article with the button on the bottom right of your desktop. Market questions or comments? Contact us at view@aegis-energy.com

Back to AEGIS Market Summary beta blog

NOTICE: The content of this report is provided for information purposes only and has been prepared to describe current trends in the commodities markets. This information does not constitute either investment or hedging advice and is intended only for AEGIS clients. If you are not the intended recipient of this report, then you may not disclose, print, copy or disseminate this information. Otherwise, if you have received this transmission in error, then please notify the sender and delete the report.

Access Our Deeper Market Insights

Product Factor Matrix

Proprietary view of priced-in factors driving the market vs. potential bullish and bearish surprises.

Learn More

Trading Recommendations

Clear trading recommendations based on real market opportunities that enable clients to take action.

Learn More

Market Data

A comprehensive suite of the latest curves, spot pricing, settles, and strips to drive confident hedging decisions.

Learn More

Benchmarking and Trade Analytics

Real-time access to analyze your hedging strategy against AEGIS benchmarks and current market activity.

Learn More