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Waha Hub spot gas basis discount narrows ahead of completed PHP maintenance

Highlights

Waha Hub rises 50 cents at preliminary May 13 settle

Permian Highway Pipeline to return to 2.1 Bcf/d May 14

Katy Hub, HSC spot gas prices see spreads flip to discount

Planned maintenance on the Permian Highway Pipeline is set to conclude May 13, increasing eastbound Permian takeaway capacity May 14 and narrowing the Waha Hub cash basis discount to Henry Hub cash on May 13 trading for flows May 14-16.

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The 2.1 Bcf/d intrastate Permian Highway Pipeline brings gas from the Waha part of the Permian Basin east to the Katy, Texas, area.

Waha Hub rose 50 cents to reach $7.255/MMBtu in May 13 trading, narrowing its spread to Henry Hub cash to 45.50 cents from 55 cents, preliminary settlement data from S&P Global Commodity Insights showed.

With more gas able to flow to the Texas Gulf Coast from the Permian May 14, some East Texas spot gas price spreads to Henry Hub cash flipped to discounts in May 13 trading. The Katy Hub cash spread to Henry Hub cash shifted to a 23.50-cent discount after seeing a 13-cent premium May 12. Similarly, the Houston Ship Channel cash spread reversed into an 18-cent discount May 13, after settling at a 13.5-cent premium in the prior day's settlement.

PHP maintenance

PHP started planned compressor station maintenance May 3, with three stages of capacity restrictions. The first stage, May 3-6, involved the most substantial capacity reductions, limiting eastbound capacity to 1.1 Bcf/d. The Waha Hub basis discount blew out to $1.815 May 4 and $1.455 May 5. The Permian gas benchmark spread to Henry Hub cash has largely remained under $1 since two new intrastate pipelines—Permian Highway and Whistler—entered service in 2021. But pipeline maintenance work that reduces takeaway capacity out of the basin can push spreads wider, as was the case in late March when Gulf Coast Express embarked on four days of planned maintenance.

The second stage of the maintenance, May 7-9, increased capacity to 1.8 Bcf/d. In May 6 trading for May 7-9 flows, Waha Hub's discount narrowed by 94.50 cents to 51 cents.

The third and final stage of the PHP maintenance, May 10-13, reduced eastbound capacity by 150 MMcf/d to 1.65 Bcf/d. The price reaction to the final stage of the maintenance was more muted, as very hot temperatures in Texas boosted gas-fired power demand.

Outlook

Looking ahead, strong local gas demand could further narrow the Waha Hub basis spread in the near term.

The US National Weather Service forecast that the highs in the Midland-Odessa area of West Texas will flirt with the triple digits through at least May 17, with the potential for making new record highs. Historical data shows that daily temperature highs for this area are typically in the high 80s Fahrenheit during mid-May.