Maintenance, Weather To Keep Pressure on Permian Gas Prices

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Credits: Michael Sohn/Pool via REUTERS

The start of pipeline maintenance season in West Texas is putting pressure on gas prices in the Permian Basin recently with cash markets at Waha and other nearby locations at risk through late May, reports Platts.

Busy maintenance schedule

In May 5 trading, spot gas prices at Waha sank to just 83 cents to hit their lowest since mid-April, data from Intercontinental Exchange and S&P Global Commodity Insights showed. Since the start of May, gas prices at Waha have fallen from over $1.60/MMBtu, or by nearly 50%, as recent pipeline maintenance and fading seasonal demand keep the gas market under pressure.

From the start of May and into the week beginning May 8, at least a dozen maintenance events on El Paso Natural Gas alone will be constraining outbound gas shipments from the Permian Basin. May 9-10, Kinder Morgan’s 2.1 Bcf/d Permian Highway Pipeline will also limit capacity to just 1.1 Bcf/d, followed by an easing to 1.65 Bcf/d May 11-12.

On May 5, combined westbound and northbound flows from the Permian were down about 210 MMcf/d, likely due at least in part to ongoing maintenance. While eastbound flows on the large intrastate pipelines are not reported publicly, it’s possible additional maintenance along that flow corridor could also limit outbound transmissions.

Weather, production

In May, warming temperatures across Texas put a damper on statewide heating demand, adding to recent pressure on the Permian gas market. Month to date, residential-commercial gas demand has averaged just over 700 MMcf/d, down from about 970 MMcf/d, April 15-30, S&P Global data shows.

Over the next seven days, population-weighted temperatures across Texas are expected to trend close to 77 F, or about 4 degrees Fahrenheit above normal for early May. As residential-commercial gas demand bottoms out, though, power demand from cooling also has yet to increase.

As seasonal gas demand wanes and pipeline maintenance picks up, Permian Basin gas production itself poses yet another risk to spot gas prices at Waha and other nearby hubs. In May, output from West Texas and New Mexico has averaged nearly 17.2 Bcf/d, roughly unchanged from the month prior. In April, strong production and maintenance combined to push spot gas prices at Waha to just 35 cents.

Forwards traders in the West Texas gas market already appear to be bracing for more pressure this month. In recent trading, the balance-of-month contract at Waha dipped to 95 cents. Earlier this spring, the May gas contract settled as low as 32 cents before expiring April 26 at $1.09/MMBtu, Platts M2MS forward data shows.

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Source: Platts