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Permian Egress Pipelines Filling Up

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Natural Gas Watch: November 4th

Rigs – East Daley’s ArkLaTex rig forecast declines significantly starting in November 2022 (shown below). We’ve seen declining Haynesville rigs since mid-October (-4 rigs), and leading producer Chesapeake said it now expects little to no growth in 2023. We expect many E&Ps in the ArkLaTex to reduce rigs, likely starting with the small privates.

Flows – Pipeline samples continue to lag our Northeast forecast. Warm weather has delayed early heating demand and pressured regional prices, cutting the incentive for more supply. NOAA forecasts above-normal temperatures to continue in November. Weak demand should help regional storage builds continue, while the expected supply ramp is likely delayed until colder weather arrives.

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Infra Constraints - Waha prices recovered from last week’s steep discounts as Gulf Coast Express and El Paso wrapped up maintenance work. Waha traded in negative territory as the maintenance event cut Permian takeaway by nearly 1.2 Bcf/d. East Daley forecasts the latest volatility to be a preview of what’s ahead. In our latest basin forecast, we project Permian egress pipelines will effectively run full by late 2022 into early 2023.

Infra Constraints – Kinder Morgan confirmed its westbound Line 2000 out of the Permian will not return to service this year. We model a 2Q23 restart although KMI has not committed to a restart date. The line went down in late 2021 following an explosion.

Storage - EIA reported a 107 Bcf storage injection for the Oct. 28 week, putting inventories at 3,501 Bcf. We forecasted storage to end October at 3,447 Bcf, but unseasonably warm weather has cut into demand. Storge is just 101 Bcf short of the 5-year average.

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