The arctic blast in North America has led to serious anomalies in the gas market. Is it all over?
The arctic blast in the United States, and especially in Texas, has led to countless problems. Lower gas production, transmission problems and damaged infrastructure have left thousands of homes without electricity. It is worth mentioning that many power plants in the United States are powered by natural gas. In addition, low temperatures also attacked Mexico, which imports 70% of its gas from Texas. However, Texas authorities banned the export of gas outside the state, at least until February 21. The American Gas Association indicated that last Sunday and Monday the demand was so huge that gas inventories reached a record level of around 150 billion cubic feet. At one point, the supply constraints were so enormous (in Texas production halved) and demand remained high that spot prices in Oklahoma reached an abstract level of $ 999 per contract (MMBTU). The spot price at Henry Hub, the US gas settlement center, jumped to around $ 25 per contract.
Texas gas production has halved due to Arctic weather. Source: EIA
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Open account Try demo Download mobile app Download mobile appSo where did yesterday's price drops come from? Yesterday's data regarding the change in US gas inventories showed a decline of 237bn cubic feet against the market consensus of 252bn cubic feet. Nevertheless, due to the huge demand, information has emerged that the decline in inventories may reach over 300 bcf. Some forecasts for next week predict a decline of 300-400 bcf, which could break the previous record from 2018 when inventories fell to 360 bcf. Additionally, there has been speculation that the weather will improve rapidly, as is the case in Europe, where temperatures are expected to rise by the end of February.
Gas inventories are currently at a 5-year average. Source: EIA
The price of gas has risen to around $ 3.3 per contract this week. The price pulled back due to a smaller decline in inventories and expectations of better weather. Today's drop below $ 3 per contract is related to price rollover. Currently, short-term contracts and spot prices are trading much higher than the April or May contracts. Source: xStation5
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