US bottleneck creates excellent entry point for longs in Oct-24 tenors
April 17, 2024
Key Observations:
Cash prices for natural gas in Texas reached at least 30-year lows this week. Waha Hub has priced below zero since Apr 2 and cleared at –$3.54 per MMBtu on Apr 15. (Yes, the subzero value means the molecules' owner has to pay this price to the buyer to take the batch away.) Cash Waha was priced at $9.65 three months ago. This volatility is remarkable even by Texan-sized standards.
One immediate driver of the price action is pipe maintenance on the El Paso and Kinder Morgan pipeline systems. Collectively, these repairds have temporarily reduced throughput on the affected streams by 1 Bcf/d. The market expects El Paso's work to be done or nearly done; however, Kinder's work on its Gulf Coast Express Pipeline is likely to extend through May 2, according to the company.
Source: Bloomberg, ICE, NYM, El Paso, Kinder Morgan, Blacklight Research. Note: between Mar 1 and Apr 16, the cash price for natural gas at the Waha Hub has dropped by $3.03 per MMBtu, with most of the cumulative decline occurring since Apr 3. In the same interval, the Oct-24 ICE UK gas futures price has advanced by the equivalent of $2.24 per MMBtu, with essentially all the gain made since Apr 3. Oct-24 NYM gas has lost just six cents. Buy signal.
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