Spot gas prices in the mid-continent, often the cheapest in the Lower 48, shot up to $ 600.00 / MMBtu Friday as snow, ice and freezing temperatures saturated the region.
Oneok Gas Transmission, also known as OGT, had gained traction in recent days as a train of winter storms began raging across the United States. At the beginning of the week, the Oklahoma point was trading in the $ 3.00 range. No transaction below $ 125.00 was executed on Friday.
AccuWeather said the temperature was expected to drop to record levels in the 1920s, teens and even the single digits in some cases by Saturday night in parts of Arkansas, Kansas, Oklahoma, and Texas – and that’s likely paving the way for a major winter storm.
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“It’s a stormy, stormy pattern across the country,” said AccuWeather meteorologist Bernie Rayno.
The forecaster noted that every time an Arctic air mass enters Texas, there is concern about snow and ice, because at some point warmer air will try to return. When warmer air collides with that colder air, “you get clouds and precipitation,” Rayno said.
“The other thing you’re looking for is whether you have energy in the atmosphere heading towards Texas, and the answer is yes,” he added.
The arrangement, which is expected to produce an extensive swath of snow and ice, will be caused by the interaction of the arctic air present and a stream of warmer and moist air from the Pacific Ocean that will flow through Mexico to Texas.
The power grid operator for most of the Lone Star state warned of a record power demand during the multi-day period of bitter cold. The Electric Reliability Council of Texas (ERCOT) said generators were asked to take the necessary steps to prepare their facilities for the expected cold weather. The checklist includes assessing fuel supplies and planned outages and implementing winter weathering procedures.
ERCOT also works with transmission operators to minimize transmission disruptions that could reduce the availability of generation or otherwise affect the system’s ability to meet demand.
Based on the current load forecast, and if temperatures continue to drop, ERCOT could set a new winter peak demand record Monday morning. The current record of peak winter demand is 65,915 MW, set on January 17, 2018.
The freeze caused gas prices to rise in the run-up to the long holiday weekend on Presidents’ Day. Houston Ship Channel spot gas traded up to $ 225.00 on MidDay Prices Friday, while pipeline freezes that began to pile up in the Permian Basin pushed Waha prices up to $ 350.00.
“In Texas and Oklahoma, we’ve had prices ranging from minus $ 10.00 to $ 600 for the past year. Amazing,” said Patrick Rau, NGI’s Director of Strategy & Research.
Robert Yawger of Mizuho Securities USA LLC, director of Energy Futures, said it was strange that gas is being “delivered to the moon” in West Texas / Oklahoma / New Mexico, while oil is “exploding upwards.” He noted that there is a lot of overlap between gas and oil infrastructure in West Texas, although the oil rally may be mainly driven by reports of an attack by the Yemeni Houthi rebels on an airport in Saudi Arabia.
“Brent has also ripped higher, which tends to point to the Houthi angle as the reason for the rally … just speculating, but the gas situation has gotten out of hand,” said Yawger.
RBN Energy LLC analyst Jason Ferguson said Perm’s production on Friday was 1.5 Bcf / d day / day, with deeper cuts likely in the coming days. “Will know more about full impact over the weekend.”
Meanwhile, sharp price hikes stretched across the country on Friday, according to MidDay Prices.
In the Rockies, Cheyenne Hub’s cash rose to $ 350.00 as nightly lows were expected to drop about 12 degrees below zero in Denver by Sunday.
The surge in heating demand resulted in rare withdrawals from storage at the Aliso Canyon facility in Southern California. Wood Mackenzie said Friday that Aliso had withdrawn a total of 2.57 Bcf in the past week.
SoCal Citygate spot gas traded as high as $ 195.00 during the three-day gas period.
On the East Coast, where snow and other winter conditions are more common, prices have started to decline from recent highs. Algonquin Citygate spot gas tapped at $ 14.00 on Friday, up from the previous day’s high of $ 16.00. Transco Zone 6 NY fetched $ 7.00, but averaged slightly lower per day / day.
Struggling future
Be that as it may, futures traders struggled to build the same level of excitement over the series of end-of-season winter blasts that poured across the country.
Nymex futures were higher Friday morning as cash prices skyrocketed due to freezing weather, but sold out quickly and shifted into the red before noon. The March contract had since gotten higher again, but was well below $ 3.00.
The American and European weather models were both a little warmer overnight. Afternoon data from the Global Forecast System was mixed, but held the milder trend for February 19-24, according to NatGasWeather. What remains a problem for the bullish case, the forecast says, is that the 11 to 15-day outlook remains rather bearish as mild conditions are currently expected to return in most of the United States for much smaller demand.
However, the damage from the current cold outbreak will have been done as the current surplus of 152 Bcf from the five-year average will turn into a deficit of more than 200 Bcf in just three weeks, with deficits likely to increase further. .
“In essence, the background will be quite optimistic if the supply / demand balance remains unchanged and as long as weather patterns don’t get too hot,” said NatGasWeather. “But price action speaks for itself, and bulls haven’t been able to get a grip this week as prices keep getting lower every time they rally and try to break out.”