(Bloomberg) — Drillers in the world’s largest shale field on Monday were paid for the natural gas they produced for the first time in more than four months.
Prices for day-ahead delivery at the Waha Hub, a key indicator for gas prices in the Permian Basin, settled at 35 cents per million British thermal units. This is the first positive price since February, ending a record 131-day streak of gas prices sitting below zero.
Hot weather, an increase in pipeline capacity as some conduits concluded maintenance and signs of a recent expansion to a key pipeline contributed to the price increase. The gain is a positive sign for producers such as Permian Resources Corp. and Devon Energy Corp., which had shut wells with very high gas-to-oil ratios to avoid bleeding more cash.
Waha hub prices had inched closer to zero in recent weeks, driven up by higher heat-related demand fueled by gas-fired electricity plants powering air-conditioning. An uptick in demand from Mexico also pushed up the sub-zero prices.
Earlier in the so-called spring shoulder season, a transitional period between spans of peak gas demand, daily prices plunged to nearly -$10 per million British thermal units, the lowest price on record. Producers had been essentially paying to have gas hauled off as pipelines reached maximum capacity.
Drillers shouldn’t hold their breath on prices remaining positive, traders and analysts say. Prices at the Waha Hub for the rest of June and July are still projected to be slightly below zero. “The market is pricing in some improvement, but maybe it’s not confident it’s going to stay positive yet,” said Paul Phillips, a senior strategist at gas marketing firm Uplift Energy.
Waha will not be consistently positive until additional pipeline projects enter service later this year, Energy Aspects Head of North American Gas David Seduski said.
–With assistance from Ruth Liao.
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