Natural gas prices in the Permian Basin ended the EIA’s gas week in positive territory, after reaching -$4.74 per million British thermal units (MmBtu) on April 20, Kallanish Energy reports.
According to the U.S. Energy Information Agency, the price at the Waha Hub in West Texas, which is located near Permian Basin production activities, averaged $0.29/MmBtu on April 15. This was $1.35/MmBtu lower than the Henry Hub price in Louisiana.
By the end of the EIA’s gas reporting week, Waha gas prices averaged $1.21/MmBtu – 66 cents lower than the Henry Hub price.
Waha gas had dropped to less than -$10/MmBtu during intraday trading last Monday, which is the lowest price on record, according to the EIA.
“The decline corresponds to the start of planned maintenance on the El Paso Natural Gas Pipeline at Cornudas, Texas — west of the Waha hub,” the EIA explained. “This planned outage, which is expected to continue through May 1, has decreased westbound takeaway capacity on the system’s south mainline by 237 million cubic feet per day (MMcf/d.)”
Negative natural gas prices at the Texas hub have happened several times over the past year, mainly because of a pipeline bottleneck. Energy companies haven’t been able to build pipelines fast enough to keep up with growing gas production associated with Permian shale oil output.
With high volumes of associated gas and infrastructure bottlenecks, flaring in the basin has risen to record amounts. When prices are negative, producers pay others to take the gas off their hands, rather than shutting oil wells, as it would still make economic sense to produce and sell crude oil and other liquids from those wells.
The EIA natural gas weekly report corresponds to the period between April 15 and April 22. The next report will be released on April 30.
This post appeared first on Kallanish Energy News.