Texas gas price drops to zero

Due to the overload of pipeline systems as a result of actively developing production and also because of fuel surpluses in the region, natural gas prices in the Permian Basin of West Texas have dropped to zero.

According to traders, natural gas trading in West Texas was carried out in the range of 20 to 70 cents per million British thermal units on Monday. At the same time, the gas benchmark futures contract in the USA is trading near the level of $5.20, while in Europe it is at about $28.

If the price of natural gas in this region falls to negative levels, in practice a situation arises in which the payment for the exemption from the energy carrier will be carried out by the producers themselves, which has not been the case for 2 years.

The collapse in prices that has taken place clearly demonstrates the sharply opposite situation between the excess of energy supplies in the United States and the aggravation of the energy crisis in the European Union ahead of the winter period.

As Bloomberg Intelligence reports, against the background of the struggle of governments and utilities for energy, the repercussions of tight gas markets in Europe and Asia may affect diesel fuel, coal and electricity.

The price collapse in Texas was affected by the planned maintenance of the Gulf Coast Express and El Paso Natural Gas pipeline systems owned by Kinder Morgan Inc.

Inadequate pipeline capacity has been a significant problem for gas producers in the Permian Basin for many years. The situation is aggravated by the performance of repair and maintenance work by pipeline operators, during which there is a temporary decrease in pressure or a stoppage of supplies.

According to Campbell Faulkner, chief data analyst at OTC Global Holdings LP, restrictions on pipeline networks have "never been relieved," making the region more sensitive to unexpected surpluses and price fluctuations.

On Monday, the price of natural gas delivered into the Waha hub was at the level of $0.41, that is, the drop was about 85%. According to Bloomberg, prices in the region reached negative values eight times in 2020 and more than twenty times in 2019.