US nat. gas surrenders gains on stock build, slides towards $2/mmBtu
Quantum Commodity Intelligence – US natural gas prices surrendered most of the mid-month gains the week ending 23 August, amid a larger-than-expected build in stocks, while consumption is set to ease as summer cooling demand slows down.
Data this week from the Energy Information Administration (EIA) revealed injections added 35 billion cubic feet (Bcf) of gas into storage during the week ending 16 Aug, more than the 29-bcf build analysts forecast in a Reuters poll.
This put gas stocks around 13% above normal for this time of year, with no shortage of supply despite some producers continuing to rein in production, mainly from the Haynesville and Marcellus gas plays.
The Sep24 Henry Hub contract in early afternoon Eastern Time Friday was at $2.02/mmBtu, down 2% on the day and rowing back by over 10% from the monthly peaks last week.
The abundance of physical gas in Texas meant that the spot price at the Waha hub has priced at negative levels throughout August, meaning Permian drillers are having to pay to dispose of associated gas production.
Waha has been pricing at around -$1/mmBtu under Henry Hub as continued pipeline maintenance severely restricts capacity, creating bottlenecks in moving gas to consumer regions.
There is little relief on the horizon in terms of ever-increasing oil output, which is set to further boost associated gas production this year and next.
Capacity
However, capacity should increase following the start-up of the 580-mile Matterhorn Express Pipeline, which is expected to enter service in the third quarter of 2024 and is able to transport up to 2.5 Bcf/d of natural gas from the Waha Hub in West Texas to Katy, Texas.
The pipeline will receive natural gas from upstream Permian Basin connections and from direct connections at processing facilities in the Midland Basin, before connecting to the Agua Blanca Pipeline.
Meanwhile, markets have found some support with LNG exports mostly back to capacity, with the EIA reporting 26 shipments leaving the US in the week to 21 August.
This included 8 from Sabine Pass; 5 from Corpus Christi; 4 from Freeport; 3 from Cameron and Calcasieu Pass; 2 from Cove Point; and 1 from Elba Island, with a combined LNG-carrying capacity of 99 Bcf.
