April 30, 2020 – Natural Gas Intelligence
Low Demand Takes Toll on Near-Term Natural Gas Forwards
By Leticia Gonzales
As the implications of the coronavirus and oil market collapse continue to unravel, natural gas forward prices retreated a bit during the April 23-29 period…
Read the full article here: https://www.naturalgasintel.com/articles/121839-low-demand-takes-toll-on-near-term-natural-gas-forwards
…The Waha forward curve indicated market expectations for higher prices beginning in May, “and the possibility of a summer in which Permian gas prices could be some of the strongest on a consistent basis since negative pricing first appeared in the basin back in 2018,” according to RBN Energy LLC.
RBN analyst Jason Ferguson noted that there are now several months along the Waha summer 2020 curve that are priced at less than 40 cents below Henry Hub, and most of this year is now priced above the 2021 curve. While the rally in Waha basis over the last few weeks has been “breathtaking,” according to the analyst, prices for the last few months of 2021 have exhibited a more muted price response, an indication that the market is pricing in the impact of two major Permian natural gas takeaway projects set to come online next fall.
Nevertheless, the collapse of crude prices has sent U.S. rig counts plunging as producers drastically scale back their capital expenditure plans. The Permian has been particularly hard hit, given its focus on oil drilling, Ferguson said, with rig counts in the basin having plunged by more than 40% since the beginning of the year.
“In fact, current prices suggest that Permian natural gas production will decline modestly by the end of this year, which will help alleviate pipeline constraints in the basin even before new pipelines come online in 2021,” the analyst said. “However, a supply reduction may come even sooner, as some producers have already announced curtailments of production for as early as May. As a result, price improvement for Waha natural gas may arrive quicker than expected.”
