Natural gas futures spiked briefly above the $2.000/MMBtu level Tuesday after the Golden Pass Pipeline updated federal regulators on its progress, sending a signal that the export terminal is advancing.
At A Glance:
- Nymex front month hits $2.009/MMBtu
- West Texas averages flip negative
- Mexico exports at around 6.3 Bcf/d
That initial reaction was pared back, though, and the April Nymex gas futures contract settled at $1.957, off its intraday high of $2.009 but still up 4.1 cents day/day.
The April contract briefly spiked above the $2.000 level around 1:25 p.m. ET after Golden Pass Pipeline LLC filed a partial in-service request with FERC. The pipeline sought to bring online 600,000 Dth/d of interim service with related facilities to move gas as far south as Golden Triangle Storage in Beaumont, TX, but not farther south to the plant under construction in Sabine Pass.
ExxonMobil in December pushed back the “mechanically complete” date for the Texas coast LNG export terminal until the first half of 2025 from a previous end of 2024 timeline, heightening scrutiny over the 2.4 Bcf/d facility’s timeline.
In contrast to that strength in futures, cash prices remained much below the $2 level. NGI’s Spot Gas National Avg. was unchanged at $1.450. West Texas spot prices flipped negative, crushed under weak demand and pipeline constraints amid a spate of maintenance. Waha averaged at a negative 54.5 cents, down 72.0 cents day/day, its first time averaging negative in five months.
Futures’ gains this week began early Monday with EQT Corp.’s announced plans to cut 30-40 Bcf/d of production in March. However, the weather continued to have its say. Updated forecast models slashed around 25 Bcf of expected demand on Monday, negating much of EQT’s cuts, and remained pointed in a bearish direction Tuesday.
Cash prices are still “going down the crapper at the wellhead,” an industrial gas user told NGI, adding that production cuts may have limited effect in tightening up supply because demand is falling off so fast into the shoulder season.
NatGasWeather said mild weather was expected to add to the surplus of gas in working storage. “The battle continues between not-cold-enough weather patterns versus hopes of lighter U.S. production will provide opportunity for massive surpluses to be reduced in time,” the forecaster said.
The latest government storage report, a 96 Bcf draw for the week ended Feb. 23, put inventory levels at 2,374 Bcf, a surplus of nearly 500 Bcf to the five-year average. Mild weather could push the surplus to 650 to 700 Bcf over the next three to four storage prints, NatGasWeather said. “Clearly, this is a massive amount and quite bearish.”
In the near term, liquefied natural gas feed gas fundamentals are trending weaker. Feed gas volumes were estimated at around 12.5 bcf/d Tuesday, their lowest level since Feb. 6, according to NGI’s U.S. LNG Export Tracker data. A third train at the Freeport LNG terminal remains offline until at least mid-March as the operator works to repair electrical damage caused by freezing temperatures in January.
Appalachia Leads Cuts
Lower 48 production fell 1.4 Bcf/d to 100.4 Bcf/d for Tuesday with declines concentrated in Texas, Permian Basin volumes in New Mexico and in the Rockies, Wood Mackenzie analyst Laura Munder said. That number is subject to revision. Monday’s tally was revised around 630 MMcf/d higher to Monday’s estimate that was mostly in the Permian’s New Mexico tally, she said.
Still, at a pace between 101-102 Bcf/d, Lower 48 gas production has fallen around 3-4 Bcf/d from its highs in January.
Much of that decline has come out of the Appalachian Basin, where production fell more than 2 Bcf/d to around 33 Bcf/d in late February from its pace above 35 Bcf/d earlier in the month, according to Bloomberg data.
Permian Basin gas production has averaged 16.4 Bcf/d in 2024, slower than its late 2024 surge above an average of 17 Bcf/d, according to Bloomberg data. Permian output fell 0.6 Bcf/d to 16.0 Bcf/d on Tuesday amid a spate of maintenance projects.
In contrast, the Haynesville Shale has not shown much of a supply response, holding below 12 Bcf/d, similar to where it started the year.
Contributing to supply tightness, Lower 48 Canadian net imports slowed to around 3.3 Bcf/d Tuesday, its lowest level since December 2021, Wood Mackenzie data show. Mexico exports at around 6.3 Bcf/d Tuesday were slightly above their 30-day average of 6.1 Bcf/d, according to the firm’s data.
Cash Gains
Spot gas prices were flat at a national level as production cuts balanced against mild weather tapping down demand.
The benchmark Henry Hub in Louisiana rose 5.5 cents day/day to average $1.540. In the Midwest, Chicago Citygate rose 9.0 cents to $1.575.
For a second day, West Texas was the outlier dropping sharply, this time with hub averages falling into negative territory. The West Texas/Southeast New Mexico regional average fell 68.5 cents to a negative 45.5 cents. El Paso Permian fell 81.5 cents to a negative 52.0 cents.
Pipeline work constrained outflows from West Texas. Permian Highway Pipeline LLC (PHP) notified customers of planned repairs to Praha Compressor Station that would limit capacity on Wednesday before it resumes full service by Thursday. PHP has a capacity of 2.65 Bcf/d after an expansion was completed in December.
Whistler Pipeline LLC is conducting maintenance this week on its intrastate pipeline that runs from the Permian to the Aqua Dulce hub in South Texas, Criterion Research Vice President of Research James Bevan told NGI.
In addition to the maintenance, strong wind and solar generation in Texas were also factors in the price weakness, though those trends had not changed substantially into Tuesday, Snapper Creek Energy analyst Kyle Cooper told NGI.
Lower 48 gas demand is expected to remain light through Friday with highs in the 60s to 80s across the southern and eastern portions of the country, including highs in the 70s across the Ohio Valley, NatGasWeather said. A weather system could drop highs into the 40s and 50s across central and southern states this weekend to provide a modest increase in demand, according to the forecaster.
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