Hold on Loosely - Waha Natgas Market Is Going Premium, But It May Be Short-Lived

RBN Energy Blogcast

A lot of people know that Permian natural gas prices have spent many days in negative territory over the last few years, only to skyrocket over $100/MMBtu during the Deep Freeze in February. Those events were mostly viewed as transitory, driven by a chronic lack of pipeline capacity in the former case and a crazy round of arctic weather in the latter. It may come as a surprise to hear that forward basis prices for natural gas in the Permian are trading at a premium to Henry Hub for at least some months over the next year or so. How could it be that gas from a supply basin way out in West Texas, where gas is considered a byproduct, trades at a premium? The answer lies in the key infrastructure changes expected in the weeks ahead and a premium in forward basis for the Houston Ship Channel gas market. How long the Texas premiums will last depends on Permian gas production, which is starting to take off again. Today, we aim to explain the latest developments in Permian and Texas natural gas markets.