The startup of two pipeline expansions has helped pull Waha natural gas prices out of persistently negative territory, materially changing the near-term economics of ethane recovery in the Permian Basin.
Kinder Morgan (KMI) on June 10 commissioned the new Gulf Coast Express compressor expansion, adding 570 MMcf/d of Permian takeaway. Cash prices at the Waha hub have steadily moved higher since, breaking into positive territory in mid-June and trading Monday (July 20) around $1.65/MMBtu. The partial start of Energy Transfer’s (ET) Hugh Brinson Pipeline has also contributed to gains.
When Waha prices were deeply negative, leaving ethane in the natural gas stream destroyed value, strongly favoring recovery at cryogenic processing plants. That advantage narrows as Waha prices improve, forcing the natural gas and petrochemical value chains to compete more directly for the same molecule.
Whether ethane is recovered or rejected is determined by the fractionation spread: the economic relationship between selling ethane into the petrochemical market vs leaving it in the natural gas stream. East Daley Analytics calculates the Permian frac spread by comparing the Mont Belvieu ethane price and Waha natural gas price, net of estimated transportation and fractionation costs.
When the frac spread falls below the breakeven threshold, rejection becomes more profitable on a standalone basis. The forward curve begins signaling rejection in November 2026, with weakness extending into early 2027 (see figure). For much of 2027, the market appears finely balanced, with recovery favored during parts of the shoulder seasons and rejection more attractive in the summer and winter, when gas demand is stronger.
Demand Growth Raises the Stakes
Golden Triangle Polymers is expected to add ~113 Mb/d of ethane demand as its new Gulf Coast cracker ramps in 2027. Meanwhile, East Daley projects global ethane shipping capacity to roughly double by the end of 2028, supporting continued export growth.
As stronger Waha prices encourage more rejection, less ethane is available to domestic and export buyers. The primary balancing mechanism is therefore a higher ethane price – one sufficient to make recovery economic again.
Integrated midstream companies may continue recovering ethane even when standalone frac-spread economics favor rejection because they also capture pipeline, fractionation and downstream margins.
Phillips 66 (PSX), for example, has committed to supplying Golden Triangle Polymers through an integrated system spanning gathering, processing, transportation, fractionation and delivery. These arrangements may delay the market response, but they do not eliminate the underlying tension between higher natural gas values and growing ethane demand.
A Higher Floor for Ethane
For much of the past decade, abundant Permian supply and constrained Waha pricing reinforced the Gulf Coast’s cheap feedstock advantage.
That assumption is becoming harder to sustain. The era of exceptionally cheap ethane may be ending, with future prices increasingly determined by how much the market must pay to incentivize recovery. – Julian Renton Tickers: ET, KMI, PSX.
One Market, One Model: Gain a Holistic View of North America Supply & Demand
East Daley Analytics is pleased to announce the Canada Supply & Demand report. The Canada S&D completes our North American model, providing a fully integrated supply and demand forecast for crude oil and natural gas. East Daley follows molecules from Canadian production through US infrastructure to end-markets. Clients now have a continental view to anticipate trends, from how Canadian gas is reshaping Midwest markets, to how crude imports flow to Gulf Coast refiners. The Canada S&D report and dataset is available exclusively in Energy Data Studio. Reach out to learn more about East Daley’s North American energy model.
Reading the Signals: Staying Ahead of Gas, Crude & NGL Markets Through Year-End
Volatility is defining today’s energy markets, and East Daley’s July webinar will help make sense of what’s next.
Prices are the signal producers can’t ignore. Natural gas prices remain under pressure while crude oil markets continue to react to geopolitical tensions in the Middle East. When realized prices compress, producers respond: deferring completions, high-grading acreage and re-underwriting economics in real time. The question isn’t whether producers are adapting, it’s how fast, and where the next pressure point emerges.
Infrastructure is the other half of the equation. In the NGL market, rising Waha gas prices, driven by new pipeline capacity, are eroding the cost advantage that’s long favored ethane rejection. In the Permian, the math is even more binding: How much longer can oil and associated gas production keep growing as crude takeaway capacity tightens? Infrastructure doesn’t just move barrels. It sets the ceiling on what producers can economically bring to market.
And none of this happens in isolation. Gas, crude and NGLs are structurally linked through associated production, processing economics and shared basin infrastructure. A shift in one commodity’s price or takeaway capacity ripples through the others, which means forecasting any single molecule in a vacuum gets you the wrong answer.
Join East Daley’s analysts as they connect these dots: breaking down the market forces shaping 2H26, what they mean for producers and midstream operators, and the key indicators to watch in the months ahead.
Click here to register for our July webinar on Wednesday, July 29 at 10:00 am MT.
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