Haynesville, Permian gains lift output to 92.7 Bcf/d
Henry Hub balance-2021 curve falls below $3/MMBtu
Forwards, futures markets shrug off storage risk
A rapid recovery in output from shale basins hard hit by the mid-February freeze lifted US gas production to an 11-month high Feb. 26, dampening recent forward-market bullishness at the Henry Hub.
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Register NowEstimated at over 92.7 Bcf/d on Feb. 26, domestic production has staged a stunning recovery over the past 10 days, climbing nearly 18 Bcf/d to its highest level since late March 2020, data compiled by S&P Global Platts Analytics showed.
The rebound has come principally from Texas, thanks to the Permian and Texas portion of the Haynesville. Production from the greater Haynesville has more than doubled from its Feb. 18 low, edging into the upper 12 Bcf/d range – now above its pre freeze-off level.
In the Permian, production is up about 3.3 Bcf/d, or nearly 40% over the same period, to an estimated 11.7 Bcf/d. In Oklahoma's SCOOP/STACK basins, nearly 1 Bcf/d in output has also been recovered since the freeze, lifting total production to an estimated 3.8 Bcf/d Feb. 26.
Smaller gains have come from the offshore Gulf of Mexico and the Bakken, where production receipts are up about 700 MMcf/d and 330 MMcf/d, respectively, since mid-February.
Forwards markets
Over the past week, rebounding gas production in Texas and the Midcontinent has hastened a correction in Henry Hub 2021 forward gas prices.
At market settlement Feb. 25, the balance-of-year curve settled at an average $2.90/MMBtu, down nearly 50 cents, or about 14%, from its mid-February high. Excluding record balance-of-month settlement prices recorded in February, the forward average for March to December has seen a smaller, but still significant, drop from a February high at $3.12/MMBtu.
In Texas and Oklahoma, regional hubs hard hit by the February supply crunch have also seen sizeable corrections to their respective March-to-December curves over the past week.
At the West Texas Waha hub, prices are down about 25 cents from their high to $2.75/MMBtu. In East Texas, average prices for March to December are down 24 cents to $2.90/MMBtu. At the NGPL Midcontinent hub in Oklahoma, the forward average has fallen 31 cents to $2.67/MMBtu, S&P Global Platts' most recently published M2MS data shows.
Storage risk
Falling valuations in the forward gas markets come despite the potential risks posed by storage.
On Feb. 25, NYMEX Henry Hub futures markets shrugged off a report from the US Energy Information Administration showing the second-largest weekly storage withdrawal on record of 338 Bcf for the prior week. Following the report's release, the NYMEX Henry Hub April contract held flat, later settling down 2 cents on the day to $2.77/MMBtu.
Over the next two reporting weeks, Platts Analytics expects a further 200 Bcf decline in US storage volumes to 1.74 Tcf, with volumes forecast to drop below 1.5 Tcf by early April – a level that could approach the EIA's reported five-year minimum.
With LNG and pipeline exports expected to trend well-above last summer's averages this year, a further rebound in gas production – back toward first-quarter 2020 levels around 93 Bcf/d – could be required to recoup the storage deficit prior to next winter's heating season.
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February 27, 2021 at 05:48AM
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ANALYSIS: US natural gas production hits 11-month high as V-shaped recovery takes hold - S&P Global
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