Mild spring weather and weak gas demand, combined with mainline maintenance, pushed natural gas spot prices at the Waha hub in West Texas into the negative this week, below zero.
Thus, on Wednesday, trade at the Wakha hub, which trades raw materials extracted from the Permian Basin, closed at around minus 35 dollars per thousand cubic meters. These data are provided by the company Refinitiv, which is quoted by Reuters.
The last time prices fell into negative territory was in October 2022, when spot prices came under pressure from the unfortunate combination of unseasonably warm weather, excess production and limited delivery capacity. Then, the quotations during the auction were at a negative level, but the settlements under the contracts themselves still had a positive value. Now, everything is different: there has not been such a phenomenon of a real collapse below zero since the end of 2020, that is, since the period before the pandemic itself.
The price of fuel due to weak demand is falling worldwide. But it is on the trading floors of Texas, which are simply flooded with gas due to the focus on increasing production and exports, that the price can turn negative. This is due to oversupply, when the seller pays the buyer for storing the shipment they purchased (and does not incur any additional costs). This is a rare event, although not exceptional, as shale gas is a by-product of oil production.
When quotes turn negative, it only means that the market is in an extremely unfavorable situation of stagnation and colossal oversupply. In general, the gas market is characterized by fragmentation and the presence of many centers of influence, but this year there is a forced consolidation of the global market, crushed by the same trends and consequences.
Such weak demand for important commodities around the world points to a deep-rooted macroeconomic disease: gas will always be needed, and demand (especially at low prices) should already be there now, as the resupply season is underway. However, a host of negative factors are putting pressure on both customer orders and overall business activity around the world, creating exotic situations such as negative gas prices (disposal cost).
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