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Gulf Coast winter gas prices defy storage build as market braces for record exports

Highlights

January forwards push $7 level at Houston Ship, Katy

South Central inventory deficit narrows to 72 Bcf: EIA

Sabine Pass, Calcasieu pile on new demand this winter

Winter forwards prices at natural gas hubs across the US South Central region are surging this week, even as cooler weather and lower demand allow more supply to flow into storage. While the recent inventory build could narrow the region's lingering deficit, record Gulf Coast LNG exports expected this winter promise to keep supply tight -- potentially fueling a continued rise in winter-season forwards.

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At key hubs across the US Gulf Coast, forwards prices for December, January and February have climbed to the mid- to upper $6s/MMBtu recently. At the benchmark Henry Hub, the three-month strip is now priced at $6.45. At Houston Ship Channel and Katy Hub, the forward curves are even higher at nearly $6.70, with prices for January now pushing $7, S&P Global Platts' most recently published M2MS data shows.

The continued winter rally comes despite a recent narrowing of the region's gas storage deficit.

In its latest release, the US Energy Information Administration reported a 23 Bcf injection to South Central storage, lifting inventories there to an estimated 1.01 Tcf, as of the week ended Sept. 24.

The latest weekly injection leaves South Central inventory 72 Bcf behind the five-year average, helping to further narrow the region's inventory deficit which had ballooned to over 100 Bcf in early September.

Assuming average injections continue over the balance of this month, South Central storage could top 1.1 Tcf by early November, giving the region near-normal inventory to cope with winter demand this season.

Despite the rise in inventory, winter forwards have continued rising amid growing alarm over the potential for record demand this season. According to a recent forecast from S&P Global Platts Analytics, the market's growing concern could be justified, based on the anticipated surge in Gulf Coast LNG export demand this winter.

Exports

By December, Platts Analytics expects initial feedgas deliveries to begin at Cheniere Energy's Sabine Pass train 6 -- the final liquefaction unit planned at the facility. Along with the other trains at Sabine Pass, the unit should ultimately consume some 700 to 800 MMcf/d.

In February, feedgas demand is also expected to begin ramping up at Venture Global's Calcasieu Pass.

Combined, Platts Analytics expects the two expansion projects to push total US LNG feedgas demand to over 12 Bcf/d this heating season. Last winter, total demand from the six operational terminals averaged about 10.4 Bcf/d from November through March, Platts Analytics data shows.

This winter, additional feedgas demand could also come from liquefaction infrastructure already in operation. In December 2020, total LNG feedgas deliveries briefly surpassed 11.5 Bcf/d in response to record export prices, which topped $30/MMBtu in Northeast Asia last January.

This winter, prices could be poised to move even higher. On Oct. 6, the Platts JKM import price was assessed at another record high, topping $56/MMBtu for November-delivered cargoes, S&P Global Platts data shows.