Permian Natural Gas

Some things you can pretty much count on this time of year, like the end of 100-degree days in Houston, Aggies rooting against Longhorns, and the Astros in the World Series. Permian natural gas production has also been consistently higher the last few years. It’s usually on its way to new highs as we approach the holidays and 2021 is another fine example. After a bang-up 2020, this year has been one of continuously solid gas production growth in the Permian, with gas volumes currently sitting near 14 Bcf/d, up around 1.5 Bcf/d versus this time last year. What’s more, at today’s crude oil prices, which encourage increasing production of oil and associated gas, there is no end in sight for Permian gas growth. Which means, as many gas traders already know, that the Permian’s primary gas market, the Waha Hub, may soon be headed back into the familiar territory of deep basis discounts. In today’s RBN blog, we look at the latest developments in Permian gas markets.

It’s not often these days that you read about gas markets in the San Juan Basin. In fact, the subject was probably never much of a hot topic because the San Juan has been something of an afterthought when it comes to Western gas markets, just a stop on the road between the Permian and markets along the West Coast and in the Rockies. However, those Western gas markets are setting up to be quite interesting this summer, as is the Waha gas market in the Permian, and understanding the mechanics of the San Juan is just one piece of the overall Western puzzle. In today’s blog, we take a look at the far-flung but increasingly interesting markets west of the Permian Basin.

A lot of people know that Permian natural gas prices have spent many days in negative territory over the last few years, only to skyrocket over $100/MMBtu during the Deep Freeze in February. Those events were mostly viewed as transitory, driven by a chronic lack of pipeline capacity in the former case and a crazy round of arctic weather in the latter. It may come as a surprise to hear that forward basis prices for natural gas in the Permian are trading at a premium to Henry Hub for at least some months over the next year or so. How could it be that gas from a supply basin way out in West Texas, where gas is considered a byproduct, trades at a premium? The answer lies in the key infrastructure changes expected in the weeks ahead and a premium in forward basis for the Houston Ship Channel gas market. How long the Texas premiums will last depends on Permian gas production, which is starting to take off again. Today, we aim to explain the latest developments in Permian and Texas natural gas markets.