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West Texas natural gas prices go negative for first time in years

Pubdate:2022-10-27 15:14 Source:World Oil Click:

(Bloomberg) — Natural gas prices in West Texas dipped below zero for the first time since 2020 as booming production overwhelms pipeline networks, trapping supplies in the region.

Gas for next-day delivery at the Waha hub in the prolific Permian Basin fell to around negative $2 per million British thermal units Tuesday, traders said. That compares with about $5 a week ago.

Producers are effectively paying someone to take gas off their hands -- something that hasn’t happened in two years. Seasonal pipeline maintenance is worsening existing constraints on the region’s network of gas conduits as mild weather curbs consumption.

America’s gas output surged to a record this year as global supply disruptions buoy prices of the heating and power-plant fuel and boost demand for US exports. Much of the gain was driven by Texas, which has long enjoyed some of the lowest energy prices in the country thanks to its vast oil and natural gas reserves. Politicians there have used the shale boom to brag about the state’s low taxes, unemployment rates and fuel costs.

Even Europe, starved of the Russian imports it has long needed, has replenished its stockpiles. But the risk of a winter gas crisis remains for countries on both sides of the Atlantic. US regulators have warned of shortages in the Northeast, a region that relies on gas from overseas to make it through the coldest months.

In the US, regulators limit how much gas producers can burn off in a process known as flaring, which releases carbon dioxide. That’s contributing to the Permian supply glut, according to Paul Phillips, a senior strategist at risk-management firm Uplift Energy Strategy in Denver.

“A crackdown on flaring both from regulators as well as self-imposed by some of the companies themselves has forced the spot market to go negative as sellers desperately look for outlets for their gas,” Phillips said.

Permian prices will probably remain under pressure through the end of the week until pipeline maintenance is completed, according to Jason Ferguson, an analyst at analysis firm RBN Energy LLC.

US gas futures for next-month delivery, meanwhile, rose on Tuesday on speculation that a recent selloff has run its course. November gas rose 3.8% to $5.395 per million Btu at 10:44 a.m. in New York.

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