Dry natural gas production in the Permian Basin averaged 22 Bcf/d for the week ended September 29, down slightly from the week prior, with small changes across most pipelines in the basin last week. The past few weeks, El Paso Pipeline has been the primary driver of lower supply. The pipeline has had three force majeure events in New Mexico and Texas this month. Caprock North Unit 2 experienced equipment failure on September 11 and there have been increased flow restrictions in New Mexico since then. The Bluewater Compressor station also had equipment failure September 18. Partial service of the station has since been restored, but there are still flow restrictions associated with the incident. On September 24, the Gresham Compressor Station in Culberson County Texas, which is located at the Texas/New Mexico border in the Permian basin, experienced a mechanical failure. That force Majeure was lifted on September 27, but the pipeline is still operating at reduced capacity from the other incidents as well as previously scheduled maintenance and repair work.
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High Supply During Spring Maintenance Keeps Waha Natural Gas Prices in the Basement
Don't Dream It's Over - Negative Permian Gas Prices, But Is the Worst Yet to Come?
Permian natural gas prices are having a rough spring. After a volatile winter that saw two periods of negative-priced trades followed by a period of relatively strong prices, values at the Permian’s major trading hubs hit the skids earlier this week just as Spring Break set in for most in the Lone Star state. Once again, pipeline maintenance and burgeoning production appear to be the main culprits, but this upheaval feels different, in our view. Clearly, the price crash has reached a new level of drama, with day-ahead spot prices at West Texas’s Waha hub now settling below zero — some days by more than $0.50/MMBtu. Gas production has raced higher too, now within striking distance of 10 Bcf/d, on the coattails of continued oil pipeline capacity expansions, but new gas pipeline takeaway capacity is an estimated six months away. What becomes of Permian gas prices in the meantime, and how much worse could already-negative prices get? Today, we discuss the drivers behind the latest price deterioration and assess what’s ahead for the Permian natural gas markets.
