Spot gas prices in the Midcontinent, often the cheapest in the Lower 48, rose to $ 600.00 / MMBtu on Friday, with snow, ice and sub-zero temperatures saturating the region.
The Oneok Gas Transmission, also known as OGT, had been gaining momentum in the past few days, when a train of winter storms began to spread across the United States. Earlier in the week, the Oklahoma point was trading in the $ 3.00 range. As of Friday, no transactions were executed below $ 125.00.
AccuWeather said temperatures are expected to drop to record levels in the 20s, teenagers and even a single digit in some cases by Saturday night in parts of Arkansas, Kansas, Oklahoma and Texas – and that should set the stage for a major winter storm.
[NGI’s natural gas price indexes have included trade data from both price reporters and the Intercontinental Exchange (ICE) since 2008. Find out more about our price index data here.]
“It’s a stormy pattern across the country,” said AccuWeather meteorologist Bernie Rayno.
The meteorologist noted that whenever a mass of air from the Arctic moves to Texas, there is a concern about snow and ice because, at some point, the warmer air will try to return. When the warmer air collides with the colder air, “you have clouds and precipitation,” said Rayno.
“The other thing you are looking for is if you have any energy in the atmosphere coming towards Texas, and the answer is yes,” he added.
The setup, which is expected to unleash an extensive strip of snow and ice, will be triggered by the interaction of arctic air at the site and a warmer and more humid air flow from the Pacific that will sweep Mexico and enter Texas.
The grid operator for most of the state of the Solitary Star warned of the record energy demand during the period of several days of intense cold. The Texas Electric Reliability Council (ERCOT) said generators were asked to take the necessary steps to prepare their facilities for the expected cold. The checklist includes reviewing the fuel supply and planned outages and implementing winter air-conditioning procedures.
ERCOT is also working with transmission operators to minimize transmission interruptions that could reduce generation availability or otherwise impact the system’s ability to meet demand.
Based on the current load forecast, and if temperatures continue to fall, ERCOT may set a new record for peak winter demand at all times on Monday morning. The current peak winter demand record is 65,915 MW, set on January 17, 2018.
The deep freeze caused gas prices to skyrocket before the long weekend of President’s Day holiday. The Houston Ship Channel’s spot gas was traded at $ 225.00 at midday prices on Friday, while the freezing of gas pipelines that began to accumulate in the Permian Basin caused Waha prices up to $ 350.00.
“Last year, in Texas and Oklahoma, we had prices ranging from less than $ 10.00 to $ 600. Incredible,” said Patrick Rau of NGI, director of Strategy and Research.
Robert Yawger of Mizuho Securities USA LLC, director of Energy Futures, said it was strange that the gas was “offered to the moon” in western Texas / Oklahoma / New Mexico at the same time that oil “explodes upwards”. He noted that there is a lot of overlap in gas / oil infrastructure in western Texas, although the surge in oil may be driven mainly by reports of an attack by Yemeni rebel rebels at an airport in Saudi Arabia.
“Brent also climbed higher, which tends to point to the Houthi angle as the reason for the rally … just speculating, but the gas situation is out of control,” said Yawger.
RBN Energy LLC analyst Jason Ferguson said Permian production fell 1.5 Bcf / d day / day on Friday, with deeper cuts likely in the coming days. “We will learn more about the full impact over the weekend.”
Meanwhile, the big price gains extend across the country, according to MidDay Price on Friday.
In the Rocky Mountains, Cheyenne Hub’s money jumped to $ 350, as overnight casualties were expected to drop about 12 degrees below zero in Denver on Sunday.
The increase in heating demand has resulted in rare withdrawals from storage at the Aliso Canyon facility in Southern California. Wood Mackenzie said on Friday that Aliso withdrew a total of 2.57 Bcf last week.
Spot gas from SoCal Citygate was traded at $ 195.00 for a three-day period.
On the east coast, where snow and other winter conditions are more common, prices have started to fall from recent highs. Algonquin Citygate’s spot gas sold out at $ 14.00 on Friday, up from the $ 16.00 high the previous day. Transco Zone 6 NY reached $ 7.00, but averaged slightly lower per day / day.
Fighting in the future
As much as they try, futures traders struggle to garner the same level of excitement with the series of winter explosions that are hitting the entire country.
Nymex futures soared on Friday morning, with spot prices skyrocketing in the cold weather, but they were quickly sold and hit red before noon. The March contract rose again, but was well below $ 3.00.
American and European climate models showed slightly hotter trends overnight. Data from the midday Global Forecast System was mixed, but maintained the milder trend for February 19 and 24, according to NatGasWeather. What remains a problem for the bullish case, according to the analyst, is that the 11 to 15-day outlook remains quite low, as mild conditions are currently expected to return in most parts of the United States to very high demand. lighter.
However, the damage from the current cold spell will have been inflicted, as the current surplus of 152 Bcf for the five-year average will turn to a deficit of more than 200 Bcf in just three weeks, with further increases in likely deficits. Below.
“Essentially, the bottom state will be quite optimistic if the supply / demand balance remains as it is and as long as weather patterns don’t get too hot,” said NatGasWeather. “But the price action speaks for itself, and the bulls were not able to get any traction this week, as prices keep falling each time they go up and try to escape.”