LNG exports hit a record high but cannot save the trapped production in the Permian Basin; West Texas natural gas spot prices fall back into negative territory

According to Zhitong Finance APP, due to commodity traders' expectations that maintenance of natural gas transportation pipelines in the region will hinder fuel delivery for some time, the spot natural gas prices in West Texas, which recently fell below zero, continue to decline to the lowest level in nearly 14 months. Traders familiar with intra-day trading prices (not fully disclosed) indicated that the "Waha hub next-day delivery natural gas spot price" in the Permian Basin, which has seen extremely high production since the beginning of this year, remained negative on Monday, although intra-day prices briefly rebounded slightly from last week's multi-month low. Last Friday, trading prices dropped to about negative $3.03 per million British thermal units, marking the lowest since November 2024. On Monday, prices briefly touched that level and continued to decline, but then slightly rebounded. Not long ago, U.S. natural gas transportation giant Kinder Morgan Inc. shut down parts of its El Paso and GCX pipelines due to maintenance issues. The company's Permian Highway pipeline is scheduled for maintenance next month. Natural gas production in the U.S. Permian Basin continues to grow, and it is far from the strongest demand areas along the Gulf Coast and Southern California, which means that natural gas drillers are constrained by pipelines, and the existing pipelines are insufficient for the currently enormous U.S. natural gas supply. Kinder Morgan declined to comment on matters outside of its online pipeline documents. Although the overall export scale of U.S. liquefied natural gas has risen to near historical highs in recent months due to the commissioning of new plants such as Plaquemines in Louisiana, the bottlenecks caused by pipeline outages will lead to oversupply in the region, while other core natural gas basins like Haynesville in Louisiana can continue to supply gas to LNG export facilities along the Gulf Coast. Affected by seasonal demand weakening and strong production, West Texas natural gas spot prices have recently turned negative. This means that natural gas producers are effectively paying buyers to take the gas away quickly. Why did the Waha hub next-day delivery spot/cash price fall below 0? The so-called "negative price" refers to the physical spot price for next-day delivery at the Waha hub in the West Texas Permian Basin falling below zero—mainly due to high production combined with pipeline maintenance/transportation constraints, forcing sellers to "pay" to get rid of the gas. An analysis report from the EIA (U.S. Energy Information Administration) pointed out that rapid growth in Permian gas production, along with maintenance or failures leading to insufficient transportation pipeline capacity, can result in a short-term situation where "too much gas cannot be transported out," causing spot prices to turn negative. This is primarily manifested as sellers paying buyers to take the gas off their hands. The "cash price/spot price" in the U.S. natural gas trading system is formed based on regional hubs (such as the aforementioned Waha and another core hub, Henry Hub) for physical natural gas spot or next-day delivery prices, quoted in $/MMBtu (dollars per million British thermal units), typically published by Gas Daily / Inside FERC based on transaction reports The cash price reflects local supply and demand along with pipeline constraints, which is different from the futures price system in the financial market. Driven by AI data centers, U.S. natural gas prices have been stronger this year compared to 2024. Overall, from the perspective of the general benchmark price for U.S. natural gas trading, the Henry Hub spot price, the average price for the first half of 2025 is $3.66/MMBtu, which is approximately 67% higher than the average price of $2.19/MMBtu for the entire year of 2024. Monthly statistics show that since 2025, prices have remained above $3 for multiple months, significantly higher than the overall trading price range for 2024 (which hit a historical low of $1.51 in March 2024). In certain large natural gas production areas (such as Waha in West Texas), short-term negative prices have occurred due to pipeline maintenance/bottlenecks, which may be a localized phenomenon. Moreover, negative prices have occasionally appeared over the past two years, representing a phase of high frequency. For instance, in 2024, the Waha hub had nearly half of its trading days at negative prices, with about 46% of trading days below zero during the period from January to August, and the lowest price reported on August 29 was -$6.41/MMBtu. The core logic behind negative prices lies in the high growth of production in the Permian Basin combined with pipeline maintenance/bottlenecks, which causes local spot prices to be "stuck," making cash prices (for next-day delivery) prone to falling below zero during short-term supply and demand imbalances. The overall strengthening of U.S. natural gas prices this year is mainly due to the soaring electricity demand driven by the construction of large AI data centers led by major tech giants like Meta and Google, along with record-high LNG exports boosting "external demand," collectively driving up prices. For the global energy landscape, as countries seek cleaner energy alternatives to oil and coal, the importance of natural gas resources, especially liquefied natural gas (LNG), is gradually surpassing that of the oil system. Particularly for AI data centers, natural gas, which shares the attributes of clean energy and is more efficient, will be one of the core important energy sources for the massive power systems of data centers in the coming years. According to some Wall Street analysts, AI training/inference systems are significant drivers of the growth in natural gas energy demand. The strong demand for clean energy such as natural gas from large data centers like Google, Microsoft, and Amazon AWS in recent years is primarily due to the global trend of decarbonization, especially in developed countries in Europe, focusing on clean attributes of renewable resources like wind and geothermal energy, as well as natural gas, which is also a clean energy source and more efficient