Viewpoint: Permian gas prices may fall in early 2020

: Natural gas
19/12/27

Natural gas prices in the Permian basin will likely decrease in the first half of 2020, Argus forward curve data suggest, despite an expected slowdown in production growth.

Investments in crude drilling in the Permian are slowing down as natural gas supply surges, an ongoing issue as gas infrastructure struggles to meet demand for takeaway. Crude wells in the oil-rich Permian basin, straddling west Texas and southeast New Mexico, produce large amounts of associated gas.

Prices at West Texas' Waha hub are anticipated at $1.211/mmBtu in monthly January business, according to Argus natural gas forward curves, down by 40pc from January 2019's average.

The Waha hub should hover above the $1/mmBtu mark for the first two months of 2020, according to Argus forward curves data, but could fall and perist below it between March-June, depending on weather-related demand, crude production and available pipeline capacity.

Daily prices at the Waha hub hit a five-year low of -$5.23/mmBtu in April. Forward prices are expected to bottom in 2020 for April at an average of about 21¢/mmBtu.

Drilling activity in the Permian basin increased between 2018 and 2019 as producers took advantage of recovering crude prices, but the number of rigs in the Permian has steadily fallen this year. The Permian had 414 rigs about midway through December, a 14pc drop from a year earlier, according to oilfield services provider Baker Hughes.

West Texas Intermediate (WTI) crude prices hit a 12-month low on 27 December 2018 at $44.61/bl, and peaked this year on 23 April at $66.30/bl. The index averaged $56.61/bl over the last 12 months. As the prices of crude drops, the amount of investment and capital possible for rigs and infrastructure in the Permian also shrinks.

As Permian oil and gas well production growth slows, producers who want to keep or increase production levels will need to accelerate their drilling activity, a challenge for those who rely on profitable crude prices.

Another ongoing challenge is constrained pipeline capacity for gas. Even as companies with extensive interstate pipeline networks can take Permian gas east, finding economic capacity is not easy for shippers.

Total Permian gas production reached 16.2 Bcf/d (459mn m³) in November, according to the US Energy Information Administration (EIA). December production is estimated at 16.5 Bcf/d, a monthly increase of about 1.3pc. The Permian accounts for about 19pc of total gas production in the US.

The completion of Kinder Morgan's Gulf Coast Express gave a temporary boost to Permian prices in late September and early October, but once the 2 Bcf/d line reached capacity, prices fell again.

Despite the continuing need for takeaway capacity in the Permian, no new pipeline projects are expected to come online next year. Kinder Morgan announced it would delay completion of its Permian Highway project until early 2021. The pipeline had been scheduled to be in service in the fourth quarter of 2020. The company said the delay was because of slow permitting.

NAmerico Energy Holdings made a similar decision when it announced earlier this year it would push the 2 Bcf/d Pecos Trail pipeline, set to move gas from the Permian to the Gulf Coast, to the middle of 2021. Targa Resources and its partners expect their 2 Bcf/d Whistler pipeline to be in service late 2021 as well.

Slower growth for Permian gas production could eventually lift prices in 2020, but it will do so only with adequate infrastructure for takeaway.

By David Haydon

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25/05/06

Trump to end military campaign in Yemen: Update

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US onshore crude output likely peaked: Diamondback

25/05/06

US onshore crude output likely peaked: Diamondback

New York, 6 May (Argus) — US onshore crude production has likely peaked as activity slows in response to the recent decline in oil prices, according to Diamondback Energy. The leading US independent estimates that the US hydraulic fracturing crew count is already down 15pc this year, while the frack crew count in the Permian basin has fallen by about 20pc from its January peak. Moreover, the US oil rig count is expected to be almost 10pc lower by the end of the second quarter with further declines seen. "As a result of these activity cuts, it is likely that U.S. onshore oil production has peaked and will begin to decline this quarter," Diamondback's chief executive officer Travis Stice said in a letter to shareholders. Given the shale sector has matured from the rapid growth seen in the early days of the shale boom, "this is not one of the types of declines that can be offset by improved efficiencies," Stice later told analysts on a conference call. Diamondback Energy also set out plans to cut spending and drill and complete fewer wells in the aftermath of the price slump, which has been driven by the economic fall-out over President Donald Trump's sweeping tariff policy, as well as the Opec+ group's plan to accelerate the return of barrels to the market. Capital spending is now seen at $3.4bn-$3.8bn this year, a decline of 10pc from the midpoint of previous expectations. The company will drop three rigs and one full-time completion crew in the second quarter, and expects to hold steady at those levels through most of the third quarter. If oil prices remain weak or fall further, Diamondback could reduce activity further. Or if prices rebound above $65, it could ramp activity back to previous levels. Under normal circumstances, it would use a period of lower service costs to build more drilled but uncompleted wells. But well casing, its biggest drilling input cost, has increased by 10pc in the last quarter due to steel tariffs. "To use a driving analogy, we are taking our foot off the accelerator as we approach a red light," said Stice. "If the light turns green before we get to the stoplight, we will hit the gas again, but we are also prepared to brake if needed." The impact on oil output is expected to be minimal given volumes have outperformed year to date. The company now sees annual oil production in a range of 480,000-495,000 b/d, down just 1pc from the midpoint of prior guidance. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Trump to end military campaign in Yemen

25/05/06

Trump to end military campaign in Yemen

Washington, 6 May (Argus) — President Donald Trump said today he will end the US military campaign against Yemen's Houthis, claiming that the militant group pledged to stop attacks on commercial ships passing through the Red Sea. The Houthis reached out with a request to stop the US bombing campaign, and the US will do so immediately, Trump told reporters at the beginning of his meeting with Canada's prime minister Mark Carney. "They don't want to fight anymore," Trump said. "We will honor that and we will stop the bombings. They have capitulated." There was no immediate statement by the Houthi group to confirm Trump's comment. US president Donald Trump's administration listed its military campaign against Yemen-based Houthis, which began on 15 March, as a key foreign policy accomplishment in his first 100 days in office even though the militant group continued to launch missile and drone attacks — most recently on 4 May against Israel's main airport. The Houthis resumed attacks on commercial shipping through Red Sea waterways in early March, after a self-declared ceasefire. They also launched attacks against Israel, drawing retaliatory strikes by the Israeli Air Force, and on US naval vessels in the Red Sea. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

US EIA will not release international outlook in 2025

25/05/06

US EIA will not release international outlook in 2025

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Australia’s election gives LNG, fuels sector certainty

25/05/05

Australia’s election gives LNG, fuels sector certainty

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