The discount of gas prices in the Permian Basin to the U.S. bellwether Henry Hub is narrowing, according the U.S. Energy Information Administration (EIA).
Rig counts fall, though at a slow rate. According to Baker Hughes, the natural gas rig count decreased by 3 to 75 for the final week in June, while the number of f oil-directed rigs fell by 10 to 189. The total rig count decreased by 13, and it now stands at 266.
The price at the Waha Hub in West Texas, situated near major Permian Basin production activities, averaged a low of $1.27/MMBtu last Wednesday – 21¢/MMBtu lower than the Henry Hub price. In early July, the Waha Hub gas price traded slightly higher at $1.45/MMBtu – some 13¢/MMBtu lower than the Henry Hub price.
Gas-burn up by a quarter
With gas storages fast approaching their filling points and comparatively low feedgas demand for LNG exports, the power generation sector is left as the largest end-user. Before the coronavirus crisis, U.S. gas consumption was nearly evenly split among the electric power sector (36% of total consumption in 2019); the industrial sector (33%); and the residential, commercial, and transportation sectors (31% combined).
Now, industrial gas use is in the doldrums while gas-burn in the power sector surged by 20.5% week-on-week, according to IHS Markit data, as temperatures increase following last week’s mild weather. Industrial sector consumption fell 1.0% week-on-week, while residential consumption fell 0.1% over the same period.
On a bullish note, analysts pointed out that feedgas to liquefied natural gas (LNG) terminals since Wednesday, July 8, increased 0.6 billion cubic feet per day (Bcf/d), or 18%, compared to last Wednesday, giving lift to prices.