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Natural gas prices at the Waha Hub in West Texas have been negative every day except two since March 12, meaning a producer could have had to pay to have their gas taken away. This situation is primarily driven by an ample supply of gas, pipe maintenance, and weakened demand. Prices may continue to see downward pressure as maintenance is expected on key takeaway pipelines in the Permian until late May. The low demand is seen both within the Permian Basin and in larger markets that traditionally receive Permian gas, like California. Maintenance on key pipelines, such as the El Paso Natural Gas (EPNG) system, has intermittently disrupted gas flows from the Permian Basin to California, contributing to the price pressure. Additionally, weak power burn from warmer-than-normal temperatures in Texas and reductions of LNG feedgas intake from Corpus Christi LNG and Freeport LNG has been weighing on Waha prices. El Paso Natural Gas System (EPNG) is undergoing planned maintenance on its North Mainline segment, with reductions of about 777 MMcf/d in the first half of April. From April 16-19, the reductions are set to increase to 1.3 Bcf/d and then shrink to as low as 109 MMcf/d between April 26-29. Furthermore, Gulf Coast Express, which carries gas Eastbound to near Corpus Christi, began maintenance on April 9 that will run through May 2, reducing capacity along this route by about 0.4 Bcf/d. This recent negative cash pricing in West Texas, exacerbated by ongoing pipeline maintenance, has put pressure on oil and gas producers. However, relief is on the horizon with the anticipated launch of the Matterhorn Express pipeline in 3Q 2024. This new pipeline, with a capacity of 2.5 Bcf/d, should significantly improve the transportation of gas from the Permian Basin to Texas coastal markets. The increased pipeline capacity is expected to exceed Permian production following Matterhorn’s start-up. The excess takeaway capacity should allow for a narrower discount for Waha to Henry Hub. The Waha forward curve agrees with this as forward pricing at Waha is much improved past this summer. |