Over the long weekend, a winter storm ripped through much of the country, hitting areas like Texas, Oklahoma, and Louisiana with prolonged freezing temperatures and precipitation. The cold snap has caused freeze-off events in key production areas, massive spikes in heating demand, and sky-high natural gas prices. Natural gas production samples suggest that Lower 48 natural gas production has fallen off by at least 12 Bcf/d compared to one week ago. Losses are driven by freeze-offs in Texas, Northern Louisiana, and the Midcontinent where oil & gas infrastructure is more susceptible to freeze-off events since temperatures do not often fall below freezing. At the same time, freezing temperatures have driven up heating and electricity demand. Though ERCOT’s power outages dominated the weekend news cycle, heating and electricity demand climbed across the country, with deliveries to LDCs and natural gas fired power plants up over 5 Bcf/d week over week.
While heating and electricity demand were driven up by residential and commercial demand during the freezing weather, LNG demand was also impacted by the weekend’s events. The weather delayed movement in Gulf Coast shipping channels, forcing operations at liquefaction facilities to a halt. Additionally, natural gas prices along the Texas Gulf Coast (HSC and Katy) traded over $160/MMBtu over the weekend. In the week prior to this cold snap, HSC and Katy cash prices traded around $3.00/MMBtu.
With demand soaring and production offline, natural gas prices across the country were sent upwards into triple-digits over the weekend and this week. The highest daily trades in the Midcontinent, Midwest, Rockies, Southwest, and Texas over the past 5 days were all over $150/MMBtu. Midcontinent pricing at ANR-OK climbed to a high trade of $300/MMBtu, Waha reached a peak at $350/MMBtu, and Chicago Citygate hit $250/MMBtu. Even looking at average daily trade values over the past 5 days, rather than just the highest trades, these same price hubs averaged near $100/MMBtu. These prices are unprecedented, especially in these geographic regions where even hubs like Opal, which typically hits premiums during the winter, historically peaked at $30/MMBtu.
Temperatures are expected to remain below freezing in the Central U.S. through Friday, and key production areas like the Permian and Northern Louisiana are expected to see snow at least once again before Thursday. The prolonged cold snap is likely to keep heating demand high and BTU Analytics models that material production volumes stay offline through Friday, with thawing likely to begin over the weekend. The second half of this week is shaping up to be just as tumultuous as the long weekend and natural gas prices could continue to top triple digits before the weekend.