US spot gas prices have plummeted to pre-winter storm levels over the last two weeks, as demand returns to seasonal norms and production bounces back after freeze-offs.
After spiking during the cold weather event in the third week of February, spot gas prices in the US West have fallen below $4/MMBtu across the board. Stronger supply from both production and inflows have kept a lid on spot prices, especially in the Permian.
In the Southwest, Waha Hub has settled in a range of $2.38-$2.645/MMBtu for Feb. 22 – March 3, after spiking to over $200/MMBtu on Feb. 16. Permian Basin gas production has averaged around 11.6 Bcf/d for the last two weeks, up from the 9 Bcf/d averaged during the cold weather event (Feb. 14-19), according to S&P Global Platts Analytics data. Inflows from the Rockies into the Southwest have increased in addition to the stronger production, averaging 2.2 Bcf/d for the last two weeks, up around 500 MMcf/d from the prior two weeks (Feb. 6-19).
Northeast, Appalachia spot weakens amid stable supplies
Northeast and Appalachia spot prices weakened across major indexes Feb. 18- March 3 amid stable supplies. The downward price trajectory was disrupted on March 3 though, when spot gas prices in New England jumped in reaction to a cold snap.
Algonquin city-gates surged $4.11 to settle at $8.235/MMBtu on March 3 for March 4 flows, the most recently available data available at time of publication. The elevated March 3 spot prices remain well below the location's year-to-date high of $12.31/MMBtu on Feb. 12.
Total inventories in the East due to high demand in the first three weeks of February stands at 424 Bcf for week ended Feb. 19, a deficit of 14.5% to the year ago levels, according to data from US Energy Information Administration.
Midwest gas prices rangebound on recovered production
US Midcontinent natural gas cash prices, for the week ended March 3, normalized to levels seen before the cold snap that produced record high prices over $200/MMBtu and $1,000/MMBtu in some locations as production recovers from freeze-offs.
The cash price for MichCon city-gate moved about 1 cent lower for the week ended March 3 to $2.74/MMBtu, while Natural Gas Pipeline-Midcontinent Pool ended the week 3 cents lower at $2.65/MMBtu. During the period of below freezing temperatures that impacted the US two-weeks ago, production in the Midcontinent reached 1.7 Bcf below January levels due to freeze-offs as prices soared. Production made a quicker than expected recovery, now operating at levels seen before the cold snap with modeled production at around 6.3 Bcf/d, according to S&P Global Platts Analytics.
Demand had also hit highs in the Upper Midwest and the Midcon producing, which have now moved to 14.71 Bcf/d and 3.78 Bcf/d respectively with warming temperatures. Total Midcontinent demand currently sits 18.49 Bcf/d, about 5 Bcf above the five-year average, while temperatures are expected to warm over the next 8-14 days putting downward pressure on demand, according to the National Weather Service outlook.
The Chicago city-gate summer strip average increased 10 cents over the last three days to $2.77/MMBtu as production is forecast to move lower throughout the rest of the month heading toward its summer averages of 5.7 Bcf/d in the Midcon Producing and 1.9 Bcf/d in the Upper Midwest, according to Platts Analytics.
East Texas gas rise as demand ticks higher
East Texas spot gas prices rose on higher demand over the last seven days of trading, before falling slightly in March 3 trading for March 4 flows.
The cash price for Houston Ship Channel sat at a 7-day high of $2.75/MMBtu for gas flowing on March 3, and then fell to $2.675/MMBtu for March 4 flows. Similarly, the cash price for Katy Hub increased 18 cents on March 2 to reach a 7-day high $2.76/MMBtu, before falling to $2.725/MMBtu.
Texas demand sat at 11.02 Bcf on March 3, according to S&P Global Platts Analytics. This level is nearly 300 MMcf higher than what demand averaged in the previous seven days.
Adding to the bullish sentiment, LNG feedgas demand increased 102 MMcf on the day to 9.91 Bcf on March 3, according to Platts Analytics. Specifically, flows to Freeport returned to normal levels, sitting at 1.72 Bcf on March 3. Feedgas demand has been muted the past couple weeks because of the deep-freeze that Texas experienced as well as fog along the Gulf Coast.
