Negative natural gas prices have returned to the Permian Basin, despite the start of Matterhorn Express Pipeline just six months ago. Maintenance and weak seasonal demand explain much of the drop, though East Daley also assumes from price trends that Matterhorn has been running short of free space.
Permian gas prices have been under pressure since late February. Waha spot prices went negative in mid-March, trading at a low of -$1.18/MMBtu on March 18, and prices remained mostly negative the rest of the month. The April ’25 Waha futures contract settled at -$0.09.
Pipeline maintenance is a big factor contributing to price weakness. The El Paso Natural Gas (EPNG) system owned by Kinder Morgan (KMI) has been conducting regular maintenance since February 24, cutting capacity on key segments like Cornudas (up to 700 MMcf/d) and the North Mainline (up to 750 MMcf/d) at various times.
Weak demand is also pressuring prices. Texas gas consumption typically falls to seasonal lows in April, when spring temperatures idle furnaces but are still too low to create cooling demand. Wind turbines, many based in West Texas, also tend to run strongest in the spring and crowd out gas generation. Reflecting soft market conditions, Transwestern Pipeline issued multiple critical notices in late March for underperformance in the Phoenix, AZ market, citing shippers for taking less gas than they nominated.
Permian production growth and tightening egress is another factor, reflected in the rapid increase in Matterhorn flows. Volumes have ramped since February, according to interstate pipeline samples East Daley tracks. Pipes recently posted receipts from Matterhorn of over 1.5 Bcf/d for 11 consecutive days, from February 23 to March 5 (see figure). Deliveries to interstate systems in March averaged 1.49 Bcf/d, a new high. The previous high of 1.43 Bcf/d was set in February.
The recent ramp in Matterhorn volumes coincides with a period when Waha basis to Henry Hub has deteriorated, falling from a ~$1/MMBtu discount at the start of February to a $3 spread by the end of the month (the relationship is shown in the price chart). Waha further weakened in March as Matterhorn interstate flows held strong, reaching a $5 spread to Henry Hub.
See East Daley Analytics’ Houston Ship Channel Supply & Demand Report for more information. We assume Matterhorn has 2 Bcf/d capacity and that our flow data is conservative, since the 42-inch line also connects to several intrastate pipes in the Katy market where visibility is limited. The pipeline would be maxed out if those intrastate deliveries have approached 400-500 MMcf/d recently, a reality suggested by negative Waha prices.
Waha prices have rebounded to over $1/MMBtu in the first week of April, but more maintenance work is ahead this month (see figure). Major maintenance events are scheduled for April 8-11, when Gulf Coast Express is due to take 820 MMcf/d offline, and April 22-25, when Permian Highway Pipeline plans to remove 950 MMcf/d of capacity. EPNG will also continue its maintenance in April and restrict key segments like Line 2000 and the North Mainline. At peak, pipelines plan to take up to 1.8 Bcf/d of pipe capacity offline this month. – James Taylor, Ian Heming and Andrew Ware. Tickers: KMI.
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