Last Tuesday (May 7) marked the 200th anniversary of the premiere of Ludwig von Beethoven’s famous Ninth Symphony. Beethoven fans might have been joined by gas market bears in singing the “Ode to Joy” on that day as the Waha cash price plummeted to negative $4.595/MMBtu according to data from Natural Gas Intelligence (NGI). This was the lowest cash price for Waha since April 2020 in the depths of the Covid crisis. Prices elsewhere in the country remained near recent normal levels, and the Waha-Henry Hub cash spread was negative $6.49/MMBtu for the day – the lowest such spread since the beginning of 2023. The plunge is visible in the dark pink line in the graph below. The spread remained below negative $4.00/MMBtu for the next four trading days. So joy for bears was accompanied by plenty of misery for unhedged producers, as the price they must pay to dispose of excess gas climbed severely.
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Waha Natural Gas Cash Passes the Other $2 Mark
L.A. Freeway - SoCalGas Storage Constraints Sideswipe Permian Gas Prices
It’s no secret by now that Permian natural gas pipelines have been running near full the last few months, jam-packed like Southern California traffic while trying to whisk away copious volumes of mostly associated natural gas to markets north, south, west and east of the basin. Despite every major artery running near capacity this summer, Permian prices had so far managed to avoid falling below the dreaded $1.00/MMBtu threshold, a precipice that historically defines a gas producing basin as definitively oversupplied. That all changed yesterday, as word came in that Southern California Gas Company, one of the largest recipients of Permian gas, has nearly filled its gas storage caverns and will soon need far less gas hitting its borders. That’s particularly bad news for the Permian, which has few other options if it needs to reduce the supply that is currently flowing west out of the basin to California. A large unplanned outage for maintenance was also announced on one of the pipelines leaving the Permian and heading north to the Midcontinent. As a result, the SoCalGas news and maintenance combined to put a huge dent in Permian gas prices, some of which plunged as low as 50 cents in Wednesday’s trading. Today, we detail this most recent development and the implications for Permian gas takeaway.
