3Q 2020 –
- Despite hurricane-related disruptions in August and September, US LNG demand increased every month in the third quarter driven by prices in Asia and Europe. Feedgas deliveries averaged 7.3 Bcf/d in October, up from 3.3 Bcf/d in July, with peak daily deliveries eclipsing 9 Bcf/d for the first time since April. While demand has mostly returned to pre-pandemic levels, gas production has not been able to keep pace despite recent rebounds, leading to tightness in the US gas market this winter. As a result, Henry Hub pricing could see significant winter upside.
- Although natural gas production remains below pre-pandemic levels, supply rebounds above mid-summer lows led to depressed supply-region basis across the US from August to October. In the Permian, the return of previously shut-in oil volumes to market brought associated gas production back above June lows, which put downward pressure on Waha basis. In Southwest Appalachia, producers brought back online production that was first shut-in in May and June, with peak daily production hitting near pre-pandemic levels. This put downward pressure on both Dominion South and TGP Zn 4 basis. The arrival of winter weather in much of the US has helped to bolster basis in the near-term. Cold winter temperatures will help to keep basis tighter through the next couple months as increased demand will help offset the impacts of production rebounds on basis.