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East Texas spot natural gas prices sink to multiyear lows, but exports may bring support

Highlights

Spot prices for five East Texas locations reach lowest level since November 2016

Price slump driven by higher output, stronger storage builds, milder temperatures

Houston — Spot natural gas prices for the five primary East Texas natural gas benchmarks dropped to their lowest levels since November 2016 this week on weaker demand and rising production, but increased exports may provide support.

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On Thursday, Houston Ship Channel fell to $2.275/MMBtu; Katy Hub to $2.285/MMBtu; Carthage Hub to $2.175/MMBtu and Transco Zone 1 to $2.215/MMBtu.

Texas Eastern East Texas fell to $2.18/MMBtu Tuesday and stayed near that low Wednesday and Thursday at a settlement price of $2.185/MMBtu.

For the first two weeks of June, the five benchmarks settled an average of 56.8 cents lower this year compared with the same period a year ago.

Houston Ship Channel has averaged $2.333/MMBtu the first half of June, down from $2.995/MMBtu the same period a year ago.

Carthage Hub has averaged $2.222/MMBtu for the first half of June, down from $2.766/MMBtu a year ago. Texas Eastern East Texas has averaged $2.219/MMBtu this year, compared with $2.784/MMBtu a year ago.

Katy Hub has averaged $2.347/MMBtu for the first half of June, down from $2.983/MMBtu last year and Transco Zone 1 averaged $2.293/MMBtu the first half of June, down from $2.727/MMBtu a year ago.

Gas production for the first half of June in Texas has averaged 20.7 Bcf/d, 5% above the 2018 average of 19.7 Bcf/d. The state's strongest production increases have come from East Texas Haynesville, which rose about 64% year on year, averaging 2.8 Bcf/d the first two weeks this year from 1.7 Bcf/d the same period a year ago.

This increased production in Texas has contributed to stronger reported storage builds this year than last. The US Energy Information Administration reported a South Central regional storage level of 842 Bcf for the week that ended June 7, 5.8% above the 796 Bcf reported for the same week a year ago.

Mild temperatures also played a role in the low prices -- the average temperature in Texas for the first two weeks of June was 78 degrees, well below the year-ago average of 84 degrees.

But commissioning of additional pipelines from Texas to Mexico and newly added LNG export capacity might provide some support to East Texas prices.

On June 13, Cheniere Energy announced that the second liquefaction train of Corpus Christi LNG has started producing LNG. Once fully operational, Train 2 will have the capacity to produce 4.5 million mt/year of LNG, or about 0.7 Bcf/d of gas. With regard to Texas-to-Mexico pipelines, TC Energy announced June 11 that the 2.6 Bcf/d Sur de Texas-Tuxpan gas marine pipeline had reached mechanical completion.

-- Kelsey Hallahan, kelsey.hallahan@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com