Natural Gas Weekly: December 9, 2022
This post was updated on December 13, 2022 at 4:25 PM MT.
Infrastructure Constraints – Waha gas prices continue to trade near zero as the Permian Highway Pipeline (PHP) undergoes maintenance, falling to $0.05/MMBtu on Tuesday morning (Dec. 13), according to Bloomberg data. Waha day-ahead gas traded as low as $0.04 last Thursday (Dec. 8) amid maintenance on PHP, which removed ~1 Bcf/d of takeaway from Dec. 6-9. While the PHP system returned to full service over the weekend, a separate maintenance event is taking ~0.45 Bcf/d offline from Dec. 13-16, contributing to the latest plunge. Waha prices briefly went negative in early November during similar maintenance events on outbound Permian pipes.
The latest collapse in Permian prices is a particularly bitter pill for shippers trapped in the basin. Prices at the SoCal Border traded as high as $45/MMBtu on Monday (Dec. 12) amid an extended cold front over the West Coast that has kept regional demand above normal. Prices at SoCal eased slightly Tuesday to $43.71, putting the spread between Waha and SoCal prices at $43.66. The Line 2000 outage on the El Paso system is limiting westbound access to West Coast markets and keeping Permian gas bottled up.
With Permian rig activity strong and spare takeaway on a knife’s edge, we see recent price volatility as the new norm heading into 2023. Our outlook is updated monthly in in our Permian Supply and Demand Forecast. East Daley currently projects ~335 MMcf/d of effective egress capacity out of the Permian, and we expect supply growth to fill basin takeaway by 1Q23.
Flows – Louisiana production increased 85 MMcf/d M-o-M in September according to EIA state data, in line with our forecast. Pipeline samples show this ramp continued through October, increasing by an additional 186 MMcf/d. East Daley had forecast production to flatten in October. Pipe samples show this trend has continued into December, indicating Haynesville production could come in higher than our latest forecast.
Infra Constraints – Spreads to the West Coast have blown out as a major cold front settles over the region. Spot prices at the SoCal Border traded at $43.71/MMBtu on Tuesday (Dec. 13), while Malin and the Sumas, WA border point traded under $40.
Strong demand in the West has caused flows to reverse on the Rockies Express Pipeline. Normally, volumes move from REX Zone 1 (CO/WY) to the Midwest and Northeast, but REX flows have shifted in the past at the Colorado-Nebraska border when the CIG-Opal price spread widens to over $1. The CIG-Opal spread has averaged $11.40 in December, drawing REX volumes westward.
Storage - EIA reported a 21 Bcf storage withdrawal for the Dec. 2 week, putting inventories at 3,462 Bcf. We forecast storage to end December at 2,767 Bcf. Storage is 58 Bcf short of the 5-year average after the latest EIA report.
East Daley Analytics' Weekly Natural Gas Watch provides a weekly update to our monthly Supply and Demand forecast. The update covers rigs, flows, production, prices, and capacity constraints that materially change our view on supply and demand. This update highlights what investors and traders need to keep their eye on in the natural gas markets to ensure they are on the right side of the market. Subscribe to the Natural Gas Watch.
Dirty Little Secrets
Dirty Little Secrets is East Daley’s annual market report summarizing trends we expect to shape the U.S. midstream energy sector during the year ahead. The Dirty Little Secrets 2023 Report will be released on December 12, 2022. The webinar will follow on Wednesday, December 14 at 10:30 AM MT.