NGI - Permian Natural Gas Spot Prices, $6-Plus In the Hole, ‘Could Get Worse’

April 3, 2019 – Natural Gas Intelligence

Permian Natural Gas Spot Prices, $6-Plus In the Hole, ‘Could Get Worse’

By Jeremiah Shelor

Down, down West Texas spot prices go. Where they stop, nobody knows.

In a clear illustration of the potential inverse relationship between crude oil and natural gas prices amid supply growth in the U.S. onshore, a glut of associated gas output continued to crush spot prices in the Permian Basin on Tuesday…

Read the full article and see the video here:

…The extreme negative gas prices in the Permian on Tuesday seemed to surprise even prognosticators like RBN Energy LLC’s Rusty Braziel, who warned in 2017 of the potential for negative prices in West Texas.

In a web presentation two years ago, Braziel noted that crude producers had gas breakeven prices that were “far lower” than gas-focused producers, ranging from negative $10/MMBtu up to a $1/MMBtu in the Permian and in Oklahoma’s SCOOP (aka, the South Central Oklahoma Oil Province) and STACK (aka, the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties).

"What I'm saying here is that at $50/bbl crude oil prices, many producers in the Permian and SCOOP/STACK can afford to pay someone to take their gas and still break even, not that they would, mind you...but they could,” Braziel said back in 2017.

As it turns out, they would.

During a web presentation on Tuesday to RBN subscribers, Braziel was asked how much lower prices could go after dropping below negative $6.000 during trading earlier in the day.

“Gee, I don’t know. I probably wouldn’t have forecasted negative $6.50” prior to Tuesday, Braziel said. “Never before have we seen gas takeaway constrained the way it is in the Permian, where the producer economics are being primarily driven by crude oil…

“That just means that gas has become something to be disposed of, just like produced water is to be disposed of. It certainly breaks our models, so in terms of taking a guess about where this is going to go, I wouldn’t have a clue. But I guess it could get worse.”