A dislocation in global energy supplies means that even as buyers in some parts of the world are desperate to secure gas, there's so much extra production in Texas that producers are burning it off as quickly as they're allowed. In West Texas, oil and natural gas are produced together. With crude prices surging on the supply disruptions sparked by the war in Iran, many drillers are happy to keep output high. But meanwhile, the region lacks the infrastructure to move all of the gas out and into the export market. As a result, local gas prices have plunged to negative levels.
Prices for next-day delivery at the Waha gas trading hub in the Permian Basin — home to roughly a quarter of US gas production — are trading well below zero. That means sellers are being forced to pay buyers to secure access to scarce pipeline capacity. Last week, Waha saw its lowest weekly average spot price on record.
The Waha market's collapse underscores a pressing issue in global energy: Even when there's enough raw-material output, many parts of the world lack the critical supply chains necessary to ship product where it's needed. As Texas gas tumbles, European gas prices have surged after an attack on the world's largest liquefied natural gas plant in Qatar. The disruption will likely tighten global supplies.
A dislocation in global energy supplies means that even as buyers in some parts of the world are desperate to secure gas, there's so much extra production in Texas that producers are burning it off as quickly as they're allowed.
Negative West Texas Gas Prices Reveal Mismatch in Global Energy
Photo Credit: (Photo: Bloomberg)
In West Texas, oil and natural gas are produced together. With crude prices surging on the supply disruptions sparked by the war in Iran, many drillers are happy to keep output high. But meanwhile, the region lacks the infrastructure to move all of the gas out and into the export market. As a result, local gas prices have plunged to negative levels.
Prices for next-day delivery at the Waha gas trading hub in the Permian Basin — home to roughly a quarter of US gas production — are trading well below zero. That means sellers are being forced to pay buyers to secure access to scarce pipeline capacity. Last week, Waha saw its lowest weekly average spot price on record.
The Waha market's collapse underscores a pressing issue in global energy: Even when there's enough raw-material output, many parts of the world lack the critical supply chains necessary to ship product where it's needed. As Texas gas tumbles, European gas prices have surged after an attack on the world's largest liquefied natural gas plant in Qatar. The disruption will likely tighten global supplies.
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