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Natural Gas Prices In The Permian Flip Negative Again

Natural gas prices at the Waha hub in West Texas are negative again this week, for the first time since plunging to an all-time low of minus $4.28 per million British thermal units (MMBtu) in early April, according to data compiled by Reuters.   

On Wednesday, next-day natural gas prices at the Waha hub in the Permian dipped to below zero—to minus $0.40 per MMBtu, for the first negative reading since early April.

According to Reuters estimates, Waha natural gas prices averaged just $0.92 per MMBtu so far in 2019, compared to $2.10 in 2018 and a five-year average of $2.80 between 2014 and 2018.

In early April, prices at the Waha hub plummeted to record low negative levels, as pipeline constraints and problems at compressor stations at one pipeline stranded gas produced in the Permian.

Gas production in the Permian has been rising in lockstep with crude oil production, and even though gas takeaway capacity has attracted less media attention, pipeline constraints for natural gas are similar to those of crude oil pipeline capacity.

The natural gas takeaway capacity constraints have resulted in more gas flaring in the Permian on the one hand, and in a record-high spread between the Waha gas hub price and the U.S. benchmark Henry Hub in Louisiana, on the other hand.

The very low natural gas prices in the Permian are dragging down exploration and production (E&P) investment returns in the most prolific U.S. shale oil basin, Moody’s said in a report last month.   

The midstream constraints for oil and gas transportation in West Texas and New Mexico have been limiting exploration and production volumes and weakening the realized oil and natural gas prices for producers, Moody’s said in early April.

Case in point: Apache Corporation said in April that it had temporarily delayed natural gas production at its Alpine High play in the Permian in late March to mitigate the impact of the extremely low prices at the Waha hub.

By Tsvetana Paraskova for Oilprice.com

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