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Natural gas prices in West Texas dropped below zero for the first time since 2020 Tuesday, as surging production in the Permian Basin region smacks up against pipeline constraints.
Gas for next-day delivery at the Waha trading hub fell to as low as negative $2.25/MMBtu, according to Financial Times, from positive ~$5/MMBtu a week ago.
The recent price plunge contrasted with $5.613/MMBtu for U.S. front-month Nymex natural gas futures (NG1:COM), +7.9% on Tuesday, and ~$28/MMBtu for the main benchmark for European gas.
The Freeport LNG terminal on the Texas coast, one of the biggest U.S. export facilities, has been out of service since a fire in June, removing a demand outlet for U.S.-produced gas, and the regional glut has been exacerbated by scheduled maintenance on Kinder Morgan’s (KMI) Gulf Coast Express and El Paso gas pipelines, which carry gas away from the Permian Basin.
Permian prices likely will remain under pressure through the end of the week until pipeline maintenance is completed, RBN Energy analyst Jason Ferguson told Bloomberg.
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Meanwhile, crude oil futures closed higher Tuesday to recoup losses from a day earlier, as concerns over tight supplies came back into focus.
Front-month Nymex crude (CL1:COM) for December delivery settled +0.8% to $85.32/bbl, and December Brent crude (CO1:COM) edged 0.3% higher to $93.52/bbl.
Gasoline (XB1:COM) interrupted its decline, with the November RBOB contract closing +6.8% to $2.916/gal after U.S. inventories fell to near an eight-year low.