Freezing Temperatures to Support Waha Gas Spot Prices

Forecasts for sub-freezing temperatures for West Texas in mid-January are threatening production freeze-offs in the Permian Basin, likely to support spot gas prices at Waha that already reached the highest since late October according to S&P Commodity Insights.

• Cash prices at Waha were up another 25cts day on day to $2.605/MMBtu as of 10 January, the highest level since late October according to S&P.
• Waha spot prices averaged $1.31/MMBtu in December, S&P data showed.
• At market settlement 9 January, the Waha balance-of-month gas contract gained over 50% on the day to settle at just over $5/MMBtu, the Platts M2MS forward gas data showed, as traders are assuming a longer-lasting price impact from this month’s cold weather and a prolonged impact the cold could have on Permian Basin gas production.
• Subfreezing temperatures in the region have been often associated with gas production declines in the Permian basin.
• Permian gas production stood at 16.26bcf/d on 10 January, compared with the 30-day moving average of 17.01bcf/d according to Bloomberg.