Natural Gas Weekly: December 16, 2022
Rigs – Since peaking in mid-October, the US rig count has fallen from 858 to 787 rigs. The loss of ~70 rigs over two months is likely tied to declines in Henry Hub and WTI prices. The largest declines have occurred in the Permian (-30 rigs), Eagle Ford (-8 rigs) and Anadarko (-8 rigs). Rigs could continue falling in these basins, with private operators the most prone to pull back on drilling. We’ve been calling for declining rigs in 2023, so recent trends are consistent with our view on the gas market next year. For a more detailed analysis, refer to this month’s Production Scenario Tools.
Infra Constraints – Permian Highway Pipeline (PHP) continued scheduled maintenance this week, taking 0.45 Bcf/d offline from Dec. 13-16. With basin takeaway tight, Waha prices fell to as low as $0.05/MMBtu Tuesday. In an update, PHP said that starting Saturday (Dec. 17) the pipeline will operate at a reduced capacity of 1.8 Bcf/d for “several weeks” and until further notice, taking ~0.3 Bcf/d of capacity offline. This will no doubt contribute to Waha price volatility until maintenance work concludes.
Flows – Northeast pipeline samples remain roughly flat W-o-W, suggesting regional production is not ramping as expected in December. We are monitoring the daily sample and weather through the end of the year and will likely pull our winter production forecast back in our next update.
Storage - EIA reported a 50 Bcf storage withdrawal for the Dec. 9 week, putting inventories at 3,412 Bcf. We forecast storage to end December at 2,767 Bcf. Storage is only 15 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 was released on December 13, 2022. Fill out the form on the Dirty Little Secrets page to receive this year's report, view last year's report and view the webinar.
