Texas Natural Gas Drops Toward Zero as Output Swamps Pipelines

Got a building your selling? Worried about Taxes? Free 1031 eBook

Natural Gas

(Bloomberg) — Natural gas prices in the Permian Basin of West Texas are plunging toward zero as booming production overwhelms pipeline networks, creating a regional glut of the fuel.

Gas in an area of the vast Permian known as Waha traded for as little as 20 cents to 70 cents per million British thermal units on Monday, traders said. That compares with the US benchmark futures contract that’s trading around $5.20 and European prices close to $28.

ity has actually been a long-term problem that has dogged Permian Basin gas producers for years. The choke points worsen when pipeline operators must perform repairs and preventative maintenance work that forces temporary reductions in pressure or halts to shipping.

Permian pipeline constraints “have never been relieved,” making the region more susceptible to sudden gluts and price volatility, said Campbell Faulkner, chief data analyst at OTC Global Holdings LP.

What Bloomberg Intelligence Says

An early-October disruption in polar vortex formation — making it more elongated — is channeling colder air toward the upper northern hemisphere, including the US, Canada, Europe and China, as Severe Weather Europe suggests. That could raise the specter of energy shortages as heating needs spike, stoking strong demand for natural gas, coal and oil products.

— Henik Fung and Chia Cheng Chen, BI analysts

Read the full report here.

There also are climate implications because much of the gas pumped in the Permian Basin is a byproduct of crude extraction. When pipelines are too full to handle any more gas, companies typically burn off the excess gas so they won’t have to reduce or stop oil production. The practice, known as flaring, has attracted increasing ire from environmental groups and scrutiny from regulators.

Gas delivered into the Waha hub crumbled by 85% to settle at 41 cents on Monday. Prices in the region went negative eight times times in 2020 and more than two dozen times in 2019, data compiled by Bloomberg shows.

(Updates with climate impact from flaring in penultimate paragraph, closing price in final paragraph)

Source: Finance.yahoo.com