Texas Waha natural gas prices turn negative on low spring demand

(Reuters) - Spot natural gas prices for Wednesday at the Waha hub in the Permian Shale in West Texas fell into negative territory as pipeline maintenance prevented some gas from leaving the basin and mild spring weather reduced demand for the fuel.

Next-day power and gas prices fell this week to their lowest in years in several U.S. regions due to low demand for heating and cooling, including a record low for power at the SP-15 hub  in Southern California.

In Waha, next-day prices for Wednesday closed at minus 35 cents per million British thermal units (mmBtu), the first time the contract closed in negative territory since October 2020, Refinitiv data showed.

Waha prices traded in negative territory in intraday trade in October 2022 but closed in positive territory as mild autumn weather kept demand low and pipeline maintenance prevented some fuel from leaving the basin.

Pipeline companies usually conduct maintenance during the spring and autumn when demand for gas is lower than during the summer air conditioning season and the winter heating season.

"As maintenance concludes and demand returns, Waha will return to its normal price levels," analysts at energy consulting firm Gelber & Associates said in a note.

Waha prices traded in negative territory several times in 2019 and 2020 as energy firms pulled record amounts of oil out of the Permian, the biggest U.S. oil-producing shale basin.

A lot of gas, called associated gas, came out of the ground with that oil, making the Permian the nation's second-biggest gas-producing basin behind Appalachia in Pennsylvania, Ohio and West Virginia.

In the past, energy firms burned some of that gas because there were not enough pipelines to transport it to market.

But flaring rates dropped in 2021 when several new pipes entered service, including the 2.0 billion-cubic-feet-per-day Whistler and Kinder Morgan Inc's 2.1-bcfd Permian Highway.

Pipeline constraints are showing up again as those pipes become full and Permian output continues to grow.

Several firms are building new pipes to alleviate that congestion, including expansions of Whistler and Permian Highway.

Gas production in the Permian is expected to reach a record 22.5 bcfd in May, up 7% since May 2022, according to federal energy projections.

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