U.S. Henry Hub gas futures rise above $6 as wintry weather and supply issues persist

0
Strong points

Winter 2022-2023 trades above $6.50/MMBtu

Cold weather to linger in the West, Midcontinent

US storage deficit expected to widen to 276 billion cubic feet

Benchmark U.S. gas futures prices soared above $6/MMBtu on April 5, for the first time since late January, as persistent cold weather and lingering supply issues pushed fueled an aging rally on the NYMEX.

Not registered?

Receive daily email alerts, subscriber notes, and personalize your experience.


Register now

At the mid-term high, the fast one-month Henry Hub contract rose nearly 50 cents to around $6.20/MMBtu with a 10-15 cent contango extending into August. For winter 2022-23 futures, prices traded between $6.50 and $6.60/MMBtu, according to data from CME Group.

In spot markets, prices rose by around 30 to 40 cents across the board, with the biggest gains in the Rockies and the West, where heating demand may remain high through the week. next as the wintry weather persists until mid-April.

According to the National Weather Service’s latest six-to-10-day forecast, states west of the continental divide of the United States now face a 60% to 90% chance of below-average temperatures through the half April.

The cold front is expected to move east across the Midcontinent in the agency’s eight-to-14-day outlook, with states as far east as the Mississippi Valley expected to experience below-average temperatures.

Cold spring weather promises to keep high temperatures between 40 and 50 degrees Fahrenheit across much of the US West and Midcontinent through mid-April, with late-winter heating demand potentially slowing the start of the gas storage injection season.


Storage room

In the week ended March 25, U.S. storage inventories rebounded from a seasonal low with an injection of 26 billion cubic feet taking inventories to 1.415 billion cubic feet, according to data from the U.S. Energy Information Administration. . According to the latest report, storage levels were 244 billion cubic feet lower than the previous five-year average.

According to storage analysts, the withdrawal season is probably not over. According to S&P Global Commodity Insights projections, wintry weather in late March may have reduced inventories by 25 billion cubic feet in the week ending April 1. According to an April 5 survey of analysts from S&P Global, storage levels likely fell by about 27 billion cubic feet in the last week of March. The next EIA storage report will be released on April 7 at 10:30 a.m. ET.

Assuming a drawdown of 25 to 27 billion cubic feet is accurate for the reporting week ending April 1, the US gas storage deficit would widen to 276 billion cubic feet. Based on current weather conditions and demand projections for the first half of April, injections of a paltry 26 billion cubic feet for the week of April 7 and 48 billion cubic feet for the week of April 14 are expected leave the existing storage deficit largely intact until the middle of the month.

As US inventories languish, production is now increasingly central to the US supply and demand story.


Production

On April 5, national gas production fell to about 90.5 billion cubic feet per day, marking its lowest level since early February, when a series of freezes reduced production across Texas and central American continent.

After hitting a yearly high of nearly 95 billion cubic feet per day in late March, U.S. gas production fell in April as revenue fell in the Permian Basin, Marcellus and Haynesville. While potentially caused by seasonal pipeline maintenance, the decline highlights recent volatility in domestic production, which has reached extremes between 85 Bcf/d and 95 Bcf/d this year.

Over the coming spring and summer months, production growth will likely play a key role in determining the strength of US gasoline prices. As the rig count in major U.S. shale plays continues to increase and drilling and completions activity picks up, the domestic production outlook looks increasingly optimistic. According to S&P Global projections, US production could exceed 97 Bcf/d by the end of the year.

Share.

Comments are closed.