pipeline maintenance

Natural gas prices at the Waha Hub in West Texas have been below zero for going on two weeks — that’s outright negative cash prices, not basis, which means Permian producers are literally paying to have their gas taken away. Ample supply along with weak demand have prompted an early start to the injection season this year and are putting downward pressure on U.S. gas prices more broadly. But why all the craziness now? One of the best ways to get a handle on the Permian gas-market meshugah is to examine gas pipeline flows within the basin and without, which, as it turns out, is the focus of our upcoming School of Energy Master Class. Today's RBN blog is a blatant advertorial for that event where we’ll be discussing gas-flow analysis, pipeline modeling and how they help explain why Waha gas prices have gone sub-zero. 

Global gas prices have had a record-breaking year so far, with JKM in Asia hitting all-time seasonal highs in spring, and TTF in Europe last week reaching the highest level since 2008. Prices have been spurred on by a global LNG market that is undersupplied and hunting for additional cargoes. If you were just looking at U.S. feedgas levels over the past several weeks, though, you would never know that we are in the middle of an incredible bull run. U.S. LNG feedgas deliveries have trailed below full-utilization levels for more than a month due to a combination of spring pipeline maintenance, LNG terminal maintenance, and operational issues. The reduced availability of pipeline and liquefaction capacity led feedgas deliveries in June to average 9.35 Bcf/d, or about 85% of full capacity. However, this was just a small and short-lived setback before what is likely to be a breakthrough summer for U.S. LNG. Feedgas demand is already back above 95% utilization and is poised to head even higher over the next few months both from new liquefaction capacity coming online and potentially from spot market cargo production. In today’s blog, we take a look at the impact of spring maintenance on U.S. LNG production and potential feedgas demand growth in the months ahead.