Cash Waha Hub plummets as Permian gas production hits new all-time high

Permian gas production reached 14.34 Bcf/d on February 18

Cash Waha Hub fell more than 20 cents in February 18 trading

Forecast warmer weather ahead for West Texas in the near term

Permian gas production hit a new record on Feb. 18, which, combined with an expectation of warmer temperatures in West Texas, weighed on Waha Hub liquidity and other regional spot prices in the February 18 spot trade for February 19-22 flows.

Cash Waha Hub fell 22 cents to $3.96/MMBtu on Feb. 18, broadening its base to cash Henry Hub at 64 cents, according to preliminary settlement data from Platts. Similarly, Transwestern, Permian Basin cash fell 26.50 cents to $3.875/MMBtu.

Waha Hub saw its spread widen as Permian production passed the 14 bcf/d mark, with an average discount of 55 cents from February 10-17, compared to a discount of 32 cents for the 30 days previous ones.

Record production

Gas production in the Permian reached 14.34 billion cubic feet on Feb. 18, the highest level recorded in data dating back to 2012, according to S&P Global Platts Analytics. Daily gas production topped 14 billion cubic feet per day from Feb. 10-18, putting February on track for the strongest month on record for Permian gas production.

Prior to this month, daily Permian production had exceeded the 14 billion cubic feet per day mark only four times.

The stronger production was supported by the growing number of rigs in the basin, which reached 308 for the week ended Feb. 16, according to Enverus data. That’s three rigs more than the previous week and 50% more than the same week a year ago, when the basin had 205 rigs in operation.

Warmer temperatures in West Texas

The National Weather Service predicts temperatures in West Texas will warm over the next few days, easing the risk of freezing additional production and reducing local gas demand.

Midland, Texas, was expected to see its daily low temperature rise into the 40s Fahrenheit from February 19-22 from 32 F on February 18. Daily highs are also expected to warm, coming out of the 50s F on February 18 and into the 60s and 70s F from February 19-22.

While western Texas was expected to see temperatures thaw slightly, daily low temperatures in New Mexico are expected to remain below or near freezing for the near term. This temperature divergence showed up in February 18 spot prices, with Transwestern, San Juan and El Paso, San Juan posting much smaller losses that day than Waha Hub and El Paso, Permian.

Outlook

Waha Hub futures were trading slightly lower on the Intercontinental Exchange on Feb. 18, suggesting the market may price in the impact of stronger production on supply and price dynamics. local demand. Waha’s March contract was trading around 4 cents lower at a discount of 58.81 cents to Henry Hub, while the April contract fell 3 cents to trade at a discount of 68 cents.

Even with higher production, winter is not over yet. Below normal temperatures are expected to return to the region as early as February 23, which could provide a boost to spot gasoline prices. The weather service’s six- to 10-day forecast shows a high likelihood of below-average temperatures in the west and central parts of the country, including Texas and New Mexico.