Negative gas prices

Given that Permian natural gas prices are once again hovering under $0.50/MMBtu, Texas’s other gas markets get little attention these days. That doesn’t mean that major shifts in the Lone Star State’s natural gas supply and demand markets aren’t occurring outside of West Texas, however. In fact, it’s quite the contrary, particularly when it comes to the Houston Ship Channel gas market. There, major changes — new gas pipelines, pipeline reversals and new LNG trains — continue to influence flows and prices. Today, we provide an update on the latest in gas infrastructure changes along the Texas coast and their potential impacts on the region’s supply and demand balance.

When it comes to Texas natural gas markets, the Permian tends to steal the show. With its roughly 2 Bcf/d of annual production growth, constrained pipelines and absurdly cheap — sometimes even negative — pricing, it’s hard for the other gas hubs in the Lone Star State to garner much attention. However, the myopic focus on West Texas overlooks a noteworthy gas market shake-up taking place on the Texas Gulf Coast, where most of the Permian’s incremental gas production is headed and where multiple new liquefied natural gas facilities are coming online to move the new supplies into world markets. Also, new export pipelines are moving increasing volumes south of the border to Mexico. Today, we provide an update on the latest in Texas Gulf Coast gas infrastructure changes and their potential impacts on the region’s supply and demand balance.

This much seems clear: natural gas demand along Texas’s Gulf Coast will be rising sharply, as will gas supply from the Permian and other inland plays to the coast. The catch is that, like clumsy dance partners, the increases in demand — mostly from new liquefaction/LNG export terminals and Mexico-bound gas pipelines — and the incremental supply to the coast via new, large-diameter pipes from the Permian are likely to be out of sync. That shifting imbalance, in turn, may well cause volatility in Houston Ship Channel gas prices as they relate to Henry Hub. In fact, we’re already seeing signs of what’s to come. Today, we continue our look at upcoming gas infrastructure expansions and their potential impact on the greater Texas Gulf Coast gas supply-demand balance.

When it comes to Texas natural gas markets, the Permian has been getting much of the attention lately, with its rapid supply growth, limited pipeline takeaway capacity and sometimes negative prices. However, a wave of gas infrastructure development just starting to come online along the Texas Gulf Coast is set to steal some of the Permian’s spotlight over the next few months. Two large liquefaction/LNG export facilities are ramping up on the coast, as are the pipeline reversal projects designed to supply them. Also, three announced Permian-to-Gulf-Coast gas pipelines slated for completion over the next 24 months will move supply cross-state to destinations spanning the area from the Houston Ship Channel to the Agua Dulce Hub near Corpus Christi. That’s a lot of change ahead for these key Texas gas markets. Today, we turn our attention downstream of the Permian to the Houston Ship Channel market, including upcoming gas infrastructure expansions and their potential impact on the greater Texas Gulf Coast gas supply and demand balance.

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.

Permian natural gas prices have been on a wild ride lately, trading more than $5/MMBtu below zero in early April before recovering to just above zero over the last few weeks. It’s hardly a secret that the Permian’s gas market woes have been the direct result of production exceeding pipeline capacity. That situation is set to change in a few months, when Kinder Morgan starts up its 1.98-Bcf/d Gulf Coast Express Pipeline, providing much needed new takeaway capacity. And that’s not all GCX will do. Its start-up will shift huge volumes of gas toward the Texas Gulf Coast that currently flow out of the Permian to other markets, likely causing a ripple effect across more than just the West Texas gas market. Today, we look at how Kinder Morgan’s new gas pipeline will redirect significant volumes of Permian gas currently flowing north to the Midcontinent.

It’s said that everything is bigger and better in Texas, and when it comes to the magnitude of negative natural gas prices, the Lone Star State recently captured the crown by a wide margin. By now, you’ve probably heard that Permian spot gas prices plumbed new depths in the past couple of weeks, falling as low as $9/MMBtu below zero in intraday trading and easily setting the record for the “biggest” negative absolute price ever recorded in U.S. gas markets. Certainly, that was bad news for many of the Permian producers selling gas into the day-ahead market. But every market has its losers and winners, and negative prices were likely “better” — dare we say much better — for those buying gas in the Permian. Today, we look at some of the players that are benefitting from negative Permian natural gas prices.