Commodity Market Report
North America gas markets short-term outlook: Light at the end of the tunnel April 2020
Report summary
It took a record inflation adjusted low, but Henry Hub gas prices are finally seeing light at the end of the tunnel. • The prompt NYMEX May contract is within striking distance of recovering above $2/mmbtu and better yet, winter prices have seen a rise above $3/mmbtu. • Market focus has again shifted to supply side impacts from low oil prices especially as unprecedented demand loss due to the coronavirus has forced oil storage to fill up rapidly and nearing containment levels. • Our latest Spring Rock production team estimate is that at 1 MM bpd of oil shut-ins this would result in >2 bcfd of associated gas lost.
Table of contents
- It took a record inflation adjusted low, but Henry Hub gas prices are finally seeing light at the end of the tunnel. The prompt NYMEX May contract is within striking distance of recovering above $2/mmbtu and better yet, winter prices have seen a rise above $3/mmbtu. Market focus has again shifted to supply side impacts from low oil prices especially as unprecedented demand loss due to the coronavirus has forced oil storage to fill up rapidly and nearing containment levels. Once there, the only other alternative for producers are oil shut-ins that have already been announced. Our latest Spring Rock production team estimate is that at 1 MM bpd this would result in >2 bcfd of associated gas lost and balloon to >6 bcfd at 3 MM bpd. Immediate gas supply losses of this magnitude would be much larger than coronavirus demand losses or LNG under-utilizations.
- Permian regional gas prices are also digging out of the abyss despite near-term bouts with negativity again. Costs to deliver Northeast production may appreciate longer-term if infrastructure projects are delayed amidst resumption of production growth.
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