Sub-freezing temperatures forecast for West Texas in mid-January are threatening production freeze-offs in the Permian Basin, potentially fuelling a continued rise in spot gas prices at Waha.
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Over the next week, an artic airmass currently centered over western and central Canada is forecast to bring the coldest weather yet this season to the US West Coast, the Rockies and the Central Plains, including much of northern Texas, according to a Jan. 9 forecast published by AccuWeather.
In Midland and Odessa, nearby to the Permian Basin, overnight temperatures are expected to tumble below freezing over the next 10-12 days. From Jan. 15-16, temperatures in the region are forecast to drop into the single-digits Fahrenheit, according to weather data from S&P Global Commodity Insights.
Freeze-off history
For producers in the Permian, subfreezing temperature, especially ones in the single-digits, have often been associated with gas production declines, either through voluntary curtailments or from wellhead freeze-offs. The most infamous Permian freeze-off was the one prompted by the winter storm that brought Arctic temperatures to Texas in mid-February 2021. In the storm’s wake, gas production dropped nearly 9 Bdf/d almost overnight, fueling a spike in spot gas prices at Waha to over $200/MMBtu.
Even last winter, though, more typical cold weather caused at least two sizeable hits to Permian gas production. In late December 2022, output dropped by over 4 Bcf/d followed by a sharp rebound in the week following. From late January to early February, gas production took a second hit of about 2 Bcf/d but was much slower to recover – not fully rebounding until late February, S&P Global data showed.
While last winter’s freeze-offs were far less disruptive for Permian producers, spot gas prices at Waha still climbed sharply in the days immediately following the basin’s production drop.
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