Amid European Energy Crisis, US Pipeline Capacity Pushes Permian NatGas Prices Near Zero

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by Tyler Durden
Tuesday, Oct 25, 2022 - 12:00 AM

While European NatGas prices have fallen in recent weeks, they remain extremely high relative to 'old norms' as Russian supply restrictions amid EU self-sacrificing sanctions are leading to fears of deaths and starvation as 'winter is coming'.

However, things are a little different in the US where Bloomberg reports that booming production in the vast Permian basis known as Waha is overwhelming pipeline networks, creating a regional glut of the fuel.

That glut has meant that, according to traders, Waha gas was trading for as little as 20 cents to 70 cents per mmBTU this morning (which compares to around $5 for the US benchmark NG contract and around $30 in Europe)...

If West Texas prices tumble into negative territory, energy producers will effectively be paying someone to take gas off their hands - something that hasn’t happened since October 2020.

Waha gas went negative eight times times in 2020 and more than two dozen times in 2019, data compiled by Bloomberg shows.

Bloomberg reports that the Texas price plunge stems from maintenance scheduled for Kinder Morgan's Gulf Coast Express and El Paso Natural Gas pipeline systems.

Permian pipeline constraints “have never been relieved,” making the region more susceptible to sudden gluts and price volatility, said Campbell Faulkner, chief data analyst at OTC Global Holdings LP.