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Природный газ

ANALYSIS: Permian cash rally signals possible end to autumn price pain for producers

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Platts Bunkerwire

ANALYSIS: Permian cash rally signals possible end to autumn price pain for producers

Самое важное

Waha rises from negative territory to over 90 cents

Outflow restrictions ease as dual maintenance events end

Colder weather to boost Permian outflows to Midcontinent

New York — The Permian gas market turned bullish Oct. 21 as easing maintenance restrictions and colder weather drove a rally in Waha cash prices, supporting recent upward momentum in winter forwards.

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In mid-session trading, cash prices at multiple West Texas hubs were sharply higher. At Waha, the spot market was up about 70 cents to 88 cents/MMBtu. At El Paso Permian, prices climbed more than 50 cents from the prior-day settlement to 91 cents/MMBtu, preliminary settlement data from S&P Global Platts showed.

Rallying prices in the Permian Basin come as an unplanned emergency maintenance on Transwestern Pipeline's San Juan lateral was scheduled to end. From Oct. 20 to Oct. 21, a zero-flow restriction through the pipeline's La Plata Compressor Station cut capacity on the lateral from 500 MMcf/d.

A similar short-term maintenance on El Paso Natural Gas Pipeline was also scheduled for completion Oct. 22, with a restoration to full flow capacity at the Cadiz Metering Station. Over the past two days, flows through the segment have been restricted to just 250 MMcf/d, down from 509 MMcf/d.

Forecasts calling for unseasonably cold weather in the Midcontinent could also be providing support for the recent rally in Permian gas prices. As a key supplier to end-user markets in the central Plains and the upper Midwest, Permian outflows to the region could get a significant boost ahead of a cold front forecast to sweep across much of the central US beginning Oct. 24.

From Oct. 24 to Oct. 28, Midwest and Midcontinent temperatures will dip to 10 degrees Fahrenheit below normal, to as much as 24 degrees F below normal. Over the same five-day period, combined residential-commercial and industrial gas demand in the region is expected to rise as much as 5 Bcf/d, according to a recent forecast from S&P Global Platts Analytics.

Forward market

In October, West Texas gas hubs have experimented with multiple, and sometimes extended, forays into negative pricing at locations such as Waha, El Paso Permian, El Paso West Texas and Transwestern Permian.

Pipeline maintenance events have been a major factor in the region's recent price dynamics, marking a sharp contrast from a relatively stable pricing environment last month. In September, Waha Hub averaged $1.29/MMBtu. At El Paso Permian, cash prices last month averaged $1.37/MMBtu.

Recent upward momentum in the cash market could signal a long-awaited seasonal shift in cash prices to over $1/MMBtu and even higher levels by the upcoming winter months.

On Oct. 21, the Waha balance-of-month contract was trading around 65 cents, down about 25 cents on the day but still well above a 17 cents/MMBtu settlement-price earlier this week. While ongoing October maintenances in the Permian could still be weighing on balance-of-month sentiment, the continued rally in West Texas cash markets on Oct. 21 could further strengthen already bullish outlooks for November and December.

On Oct. 20, the Waha November contract surged along with the cash market, rising 42 cents to $1.70/MMBtu. The December contract saw a more modest gain, climbing just 10 cents to $2.79/MMBtu. The Oct. 20 price rally failed to offer much additional support to the January and February contracts, with both trading relatively flat around $3.15/MMBtu.

S&P Global Platts' M2MS forwards data for Oct. 21 was not yet available at the time of publishing.