US Natural Gas Prices Continue Freefall This Winter
https://www.rigzone.com/news/us_natural_gas_prices_continue_freefall_this_winter-03-feb-2020-160960-article/February 03, 2020
After the lowest summer U.S. natural gas prices since 1998, the market has continued to fall this winter 2019-2020. The cold weather has simply not arrived. In fact, after the second warmest November on record, nine of the ten weeks ending November 23 to January 25 were all “warmer†than normal, as recorded by Heating Degree Days. In turn, the storage withdrawals to meet winter’s collision of heating and power demand have been much lower than normal (see Figure). By the close of January, U.S. gas inventories stood almost 25 percent above the same time last year and 10 percent above the five-year average. On January 21, Henry Hub spot prices crashed below $2 per MMBtu for the first time since the end of May 2016.
Beyond just very mild winter weather, U.S. gas prices have remained at historic lows due to record domestic supply that seemingly will not stop. After rising some 13-15 percent in 2018 output rose another 10-12 percent in 2019 to almost 93 Bcf/d. This has led to a 3-4 Bcf/d oversupply in terms of U.S. gas production rising above consumption. Not even a booming export complex that in 2019 averaged 5.8 Bcf/d of LNG feedgas and 5.1 Bcf/d of piped supply to Mexico has been able to slow the fall in pricing.
The main problem for U.S. overproduction has been that activity in the Permian basin – a West Texas play that now accounts for 20 percent of the country’s gas supply – is not being driven by price signals. The light, tight oil revolution in the Permian continues to yield an oversupply of basically “free†associated gas. So much so that prices at the local Waha gas hub have often been drifting into the negatives, meaning that producers are actually paying companies to take the gas away to allow for more crude extraction....
