Natural gas prices firm up in anticipation of new pipeline becoming operational

US Energy Information Administration:
Natural gas spot prices at the Waha hub in western Texas, located near Permian Basin production, settled at $1.55/million British thermal units (MMBtu) on August 15, the highest price since March 2019. This price increase coincides with the 2 billion cubic feet per day (Bcf/d) Gulf Coast Express Pipeline (GCX) preparing to enter service. GCX will provide much-needed additional natural gas takeaway pipeline capacity from the Permian region of western Texas and southeastern New Mexico.

Natural gas pipelines out of the Permian Basin

Limited natural gas pipeline takeaway capacity from the region has kept prices very low, or even negative, in recent months. During the first eight months of 2019 (through August 19), the Waha spot price averaged just 65¢/MMBtu. The Waha spot price has been consistently lower than the Henry Hub spot price—the national benchmark price for natural gas.

However, in recent days, that differential has significantly decreased, and Waha spot prices posted 59¢/MMBtu lower than the Henry Hub spot price last Thursday, which was the lowest daily differential since January. In comparison, this differential averaged between $2/MMBtu and $3/MMBtu between March and June of this year.
This could lead to greater production of oil in the Permian basin as they now have a better way to handle the natural gas byproduct.  It should also make it better to export both oil and gas from the region.


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