There’s never a dull moment in the Permian gas market these days, as prices at the major trading hubs remain extremely volatile, fueled by insufficient natural gas pipeline takeaway capacity. After prices tumbled to fresh lows in late April, with the Waha hub trading as much as $9/MMBtu below zero, the market appeared to regain its footing somewhat in early May as production curtailments lifted prices above zero. However, that reprieve was short-lived; prices last week again fell into negative territory heading into Memorial Day weekend. That said, the possibility of new takeaway capacity materializing in the weeks ahead, earlier than expected, has renewed hope among some market participants that the Permian gas price woes will soon be a thing of the past. How likely is that really, and will it be enough to equalize the beleaguered market? Today, we look at potential near-term developments that could support Permian gas prices.
The Permian gas market continues to keep us on our toes. We’ve detailed the Waha Hub’s ups and downs (mostly downs) frequently in the RBN blogosphere, from when prices first traded below zero back in November 2018 (see Keep Breathin’) to last month when prices cratered to the lowest, most negative prices ever recorded in U.S. gas markets (see Money for Nothing, Gas for Free). Then, a couple of weeks ago in Take Me To The Other Side, we looked ahead to the in-service of Kinder Morgan’s Gulf Coast Express (GCX) pipeline this fall, which would provide the first big bump in gas takeaway capacity out of the basin in a long while and shift a substantial volume of Permian gas toward the Gulf Coast. At the time of that blog (in early May), Permian gas prices had staged something of a recovery from the depths reached in April (dashed red circle in Figure 1 below) and were holding their ground just above zero (dashed green circle). Things move quickly in the Permian, though, and just after we had noted that improvement, prices turned negative again in the days leading up to Memorial Day weekend, dropping as low as negative-$3.50/MMBtu in intraday trading on Friday, May 24 (dashed light blue circle).