Rigs: The total US rig count decreased to 581 rigs for the week of July 18.
Infrastructure: New gas pipeline expansions have bolstered drilling economics for Permian producers, but limited capacity on crude pipes could constrain the basin’s growth.
Supply and Demand: The US natural gas pipeline sample, a proxy for change in oil production, decreased 0.9% W-o-W across all liquids-focused basins for the week ending July 27.
Rigs:
The total US rig count declined by 3 rigs to 581 for the week of July 18. Liquids-driven basins decreased from 451 to 449 rigs.
- Anadarko (+1): Raney Oil
- Eagle Ford (-1): Verdun Oil Co.
- Powder River (-1): WRC Energy
- Permian (-1)
- Midland (-1): Langford & Brigham Operating
Infrastructure:
The start of new Permian gas pipeline expansions has materially improved Waha hub prices and bolstered drilling economics for producers. However, a review by East Daley Analytics finds capacity on crude oil pipelines is growing scarce to key downstream markets, a potential constraint on the next phase of growth in the basin.
Waha spot prices traded around $1.65/MMBtu early last week, a dramatic turnaround from the negative prices seen through most of 2026 as a result of the gas egress bottleneck. Negative gas prices have prompted some producers to shut-in wells and kept Permian drilling constrained despite higher WTI prices.
The gains at Waha have followed startup of the 570 MMcf/d compression expansion on Kinder Morgan’s (KMI) Gulf Coast Express Pipeline, as well as the partial start of Energy Transfer’s (ET) Hugh Brinson line. Waha is now trading about $4/MMBtu higher since the start of June.
Additional gas capacity is expected in 4Q26 from the start of Blackcomb Pipeline and further construction on Hugh Brinson, followed by Eiger Express in mid-2028. The new pipelines come amid a bullish outlook for natural gas, including rising demand from data centers and LNG facilities, that could support stronger Permian gas growth.
However, because most Permian gas is produced alongside crude oil, limited crude takeaway capacity could ultimately become the more significant constraint on gas growth.
Using East Daley Analytics’ Production Scenario Tool (PST), we developed a high-growth scenario to test when crude infrastructure could become the limiting factor.
East Daley’s base case forecasts Permian residue gas production will increase 13.5%, or roughly 3 Bcf/d from December 2026 through December 2028, while crude production grows 3.5%, or 242 Mb/d.
In the high case, we gradually add 35 more rigs in the Delaware Basin and 20 rigs in the Midland Basin, bringing the total Permian rig count to 314. This remains below the basin’s historical peak. Under this scenario, residue gas production grows 22.2% (~5 Bcf/d) while crude production increases 13.5% (934 Mb/d).
By January 2029, Permian crude production reaches ~7.9 MMb/d, effectively matching the basin’s estimated 7.89 MMb/d of nameplate long-haul takeaway capacity. Meanwhile, dry gas production reaches about 28 Bcf/d vs 31.5 Bcf/d of takeaway capacity. This suggests crude infrastructure could become the binding constraint on further Permian gas growth.
Based on the latest T-1 filings at the Texas Railroad Commission, crude pipelines bound for Corpus Christi, the premier destination for exports, were 99.7% utilized, while Houston-bound pipelines were 91.7% utilized.
Most spare crude capacity out of the Permian is available on Cushing-bound pipelines like Basin, Sunrise and Centurion. This corridor was 68.2% utilized, according to the T-1 filings. However, Cushing normally trades at a discount to Gulf Coast destinations, so producers would need to accept lower prices to continue growing.
Investor Takeaway: Gas is becoming a growing opportunity for Permian producers, but even a modest increase in crude oil production will increase pressure on Permian takeaway infrastructure and renew interest in crude pipeline expansions. Corpus Christi appears to be the most likely corridor for future expansions.
Supply and Demand:
The US natural gas pipeline sample, a proxy for change in oil production, decreased 0.9% W-o-W for the July 13 week across all liquids-focused basins.
The Barnett (-12.7%) posted the largest decrease for the week, followed by the Anadarko (-3.2%), Permian (-1.8%) and Arkoma (-0.9%). Volumes increased in the Williston (+3.1%), Eagle Ford (+1.4%), Rockies (+0.3%) and Gulf of America (+0.1%). The Rockies and the Gulf of America have a high correlation between gas volumes and crude oil volumes, whereas the Permian and Eagle Ford basins correlation is less than 45%.
As of July 27, 93.5 Mb/d is offline due to planned maintenance at the Par Pacific East refinery in Kapolei, HI. The refinery is expected to run at full capacity by the end of the month.
Vessel traffic monitored by East Daley along the Gulf Coast decreased W-o-W. A total of 17 vessels were loaded for the week ending July 25, a significant decrease from the previous week.