Midcon, Texas gas prices hit records; polar weather throws US market off kilter

New York — With Polar Vortex weather sweeping across the continental US, spot natural gas prices climbed to fresh record highs again, starting the trading week amid a historic supply crunch in the US gas market.

The Midcontinent and Texas led the surge in prices Feb. 16 as population-weighted temperatures in the two regions tumbled to the their coldest on record over the weekend.

At hubs across Kansas, Oklahoma and Eastern Arkansas, spot gas prices traded into the $300 to $400/MMBtu range. One Oak Gas Transmission was a notable outlier with cash prices there settling at over $900/MMBtu. In East Texas, prices at Houston Ship Channel were assessed at $400/MMBtu and at the nearby Katy Hub at over $350/MMBtu, preliminary settlement data from S&P Global Platts showed.

The market rally was largely contained to undersupplied hubs in the coldest regions. At the Henry Hub, prices hit their highest in 18 years at nearly $17 but remained well below nearby locations in East Texas.

Along with Louisiana and the Southeast, hubs dotting the Northeastern Seaboard remained largely insulated from the historic price action with Transco Zone 6 NY and Boston's Algonquin city-gates ending the trading day at $15.04 and $11.54/MMBtu, respectively.

Supply and Demand

Record prices reflected the continuing and now historic supply crunch in the US market.

Over the weekend, total US gas demand climbed to nearly 147 Bcf/d, marking the second-highest demand day on record, bested only once previously in late January 2019, Platts Analytics data showed.

Record demand met with freeze-offs across nearly every major US basin, led by the Permian and the Haynesville with smaller declines in the SCOOP/STACK, the Eagle Ford, the Marcellus, the Denver-Julesburg, the Bakken and the Utica, in ranking order. In total, the US has lost nearly 11 Bcf/d of supply over the past week, with total production estimated Feb. 16 at just 79.1 Bcf/d, making for the largest weekly decline in output since Hurricane Ike crashed into the US Gulf Coast in September 2008.

The drop in production prompted shippers across the US to rein in gas exports and ramp up imports. At US LNG terminals across the US, gas deliveries plunged to just 5.5 Bcf/d over the weekend, down from levels at over 10 Bcf/d in the week prior.

Pipeline exports to Mexico fell about 1.4 Bcf/d as shippers across Texas moved to keep much-needed supply in state. Gas imports from Canada surged to their highest in more than three years at 7.4 Bcf/d while LNG imports climbed to 1.7 Bcf/d.

Gas storage inventories have offered additional, but less than sufficient, supply to meet the precipitous surge in spot gas demand, with daily drawdowns recently hitting 60 Bcf, implied storage data from S&P Global Platts Analytics showed.