Waha Hub spot gas rises on heat wave, improved takeaway capacity

The Permian Basin's Waha Hub spot gas has gained nearly 50 cents in the last three trading sessions on a forecast West Texas heat wave expected to drive demand for gas-fired power, as well as the return of some pipeline takeaway capacity following maintenance completion.

Waha Hub gained 36.50 cents to reach $6.07/MMBtu in April 13 trading for next-day flows, preliminary settlement data from S&P Global Commodity Insights shows. El Paso, Permian also leapt 30.50 cents in April 13 trading, reaching $6.045/MMBtu at preliminary settlement.

The daily gains have helped narrow the gap between Waha Hub and other Southwest pricing locations, like El Paso, San Juan and El Paso, South Mainline.

Heat wave

Hotter temperatures in West Texas could boost local gas-fired power demand for cooling in the near-term, as daily high temperatures approach record levels.

The National Weather Service forecast that the high temperature in Midland, Texas, will climb nearly 20 degrees over the next several days, reaching 91 degrees Fahrenheit on April 15 from 74 F on April 13. Historical data from the weather service shows that mid-April daily highs in West Texas typically come in around 80 F.

April 15's forecast high temperature will be just 5 degrees shy of an all-time recorded high for Midland at this time of year, according to records going back to 1931.

Takeaway capacity

Improved takeaway capacity availability has also helped alleviate downward pressure on Waha Hub and other Permian spot gas pricing locations. Several recent pipeline maintenance and repair projects have been resolved over the last several days, including on Gulf Coast Express Pipeline and El Paso Natural Gas pipeline system.

Gulf Coast Express Pipeline, an intrastate pipeline that brings gas from the Waha area to Agua Dulce in South Texas, had reduced eastbound flows for March 31-April 8, due to compressor station inspections and repairs.

El Paso Natural Gas pipeline system reduced flows at a number of locations along its Wink to Black River corridor to zero for April 4-10, in order to run cleaning tools along Line 2000. Pipeline nomination data shows that flows past Wink compressor station dropped to average 3 MMcf/d for the duration of the maintenance and have since recovered to average 343 MMcf/d April 12-13.

Looking ahead

The higher-than-normal temperatures might continue in the near-term, with the weather service's six- to 10-day and eight- to 14-day forecasts both showing a probability of above-average temperatures in the US Southwest, including West Texas.

As of 2 pm ET on April 13, Waha Hub's May contract was trading at a 97.4-cent discount to Henry Hub on the Intercontinental Exchange, narrowing the spread by 2.5 cents from its prior-day settlement.