Rockies Natural Gas Basis Rises Amid Lower Oil Prices

May 1, 2020July 28th, 2020
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Rockies natural gas prices have improved throughout the forward curve, as associated gas production declines.

Hedging CIG winters is looking attractive at the moment; given its tightness to more premium markets. Summer strips are much improved, but also have a higher likelyhood for further upward mobility given their deeper discount to Midcont. and Midwest markets.

For this discussion we will concentrate on Rockies in and around the Denver-Julesburg basin, on the east side of Colorado and southeast portion of Wyoming. Colorado Interstate Gas (CIG) basis pricing has seen a dramatic improvement over the past three-months, with most of the improvement in the past month.

The chart below shows historical CIG prompt month (solid dark blue line), and the CIG forward curve (dark blue dotted line) as of April 30. Also on the chart, is the CIG forward curve as of three-months ago with the corresponding change in the forward curve shown in gray. The prompt contract has rallied the most at nearly 50c and the next two winters have also seen a surge. Summer’ 21 and Summer ’22 CIG strips have rallied as well, but not as much as winter, only about 10-15c a piece.

Historical prompt month CIG
Light blue dotted line – CIG forward curve as of three months ago
Gray columns represent the change in the forward curve from three months ago

Many basis prices have improved since early March, when oil prices sank. Since then, the market has apparently expected large decreases in associated gas and output from rich-gas areas.

The Gas Basis chart (right) shows many of the surrounding or competing basis locations to CIG. We can see that Rockies prices have risen to be much nearer premium Midwest prices like Michcon in the winters. CIG has moved to more of a premium than a competing Oklahoma price, NGPL-Midcont, during this time period.

However, Rockies gas dips down near Waha prices in the summers’, when local demand in the summer is low. Rockies gas competes with West Texas gas for Midwest market share, and gas prices in the Permian basin have greatly improved (Waha Prices Are Much Improved as Permian Oil Production Is Set to Fall). As Waha has improved, eastern-Rockies gas (CIG) doesn’t need to discount itself as much to compete.

Winter 20/21 CIG sits just under Michcon in the Midwest and above NGPL in the Midcont.
In the Summers’, CIG falls down near Waha as it competes for demand

CIG summer prices have improved more than winter, when compared to other regions’. This past winter, summer and winter strips were nearly 25c apart. Prior to expected associated-gas declines due to COVID-19 demand losses that sent oil lower, natural gas production was expected to continue growing, both in the Rockies and in competing regions, specifically the Permian basin.

Now that those associated-gas projections have been slashed, the discrepancy between summer and winter basis has moderated. Most of the contraction has been because summer strips have risen. Summer ’20 for instance has surged by 30c since March, nearly at the Winter ’20/’21 strip price. Summer ’21 and Summer ’22 haven’t rallied as much, still trading about 30c back from the next two winter strips.

Production & Rigs

Gas production has tumbled, and fewer rigs operating suggests declines will continue.

Natural Gas production in the Rockies has started to drop over the past few weeks as oil prices have been weak and oil storage has become an issue. Gas production in the greater Rockies area has fallen about 600 MMcf/d since mid-April.

Drilling rigs in Colorado, mostly in the DJ, have been falling for over a year now. A drop in rigs is likely to translate into less oil and associated gas in the future, typically on a 6-9 month lag.


Less gas is leaving the Rockies toward the Midwest.

Eastbound flows on Rockies Express (REX), the major outlet to Midwest markets for the Rockies, have been heavily under-performing since late March. REX is a very seasonal pipeline for outbound Rockies gas. In the winter, more gas needs to stay home and serve local demand, but in the summer, eastbound flows at times, max out as gas tries to reach more premium demand markets. What the chart below shows is a large curtailment in flows for this time of year. Sometimes we can attribute this spring maintenance, but flows have hovered around 750 MMcf/d for more than a month now, in contrast to last year and the five-average where gas was flowing double that. It’s possible that the reduced flows are due to lower amounts of gas production and or an uptick in local demand for this time of year, but more likely the former.

One of the main southbound outlets for eastern Colorado gas is on CIG, headed through the Midcont. region. The chart below shows the steep drop in flows of nearly 200 MMcf/d, but we can attribute this to seasonal maintenance on CIG.

We continue to monitor oil, gas, NGLs, and regional markets for hedging opportunities. To learn more and see AEGIS opinion and recommendations, go to AEGIS View publications, or contact Like what you see? Share this article with the button on the bottom right of your desktop. Market questions or comments? Contact us at

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