At a time when natural gas prices in Europe are rising and hitting new highs, the prices of natural gas in the United States are falling to zero.
The price of natural gas in the Permian Basin of West Texas fell to zero due to the excessive local supply caused by the sufficient production and the transportation capacity of the pipeline network.
On Monday, October 24, the price of Waha natural gas in the Permian region hovered between 0.20 and 0.70 US dollars/million British thermal units. In contrast, the price of natural gas in New York, the benchmark futures of the United States, is around 5.20 dollars, while the price of European futures is close to 28 dollars.
If the price of natural gas in West Texas falls below zero, energy producers will send the natural gas free of charge and pay the freight to each other - this will be the first time in two years.
The sharp drop in natural gas prices in Texas shows that with the approaching of winter, there is a sharp contrast between the rich fuel supply in the United States and the worsening energy crisis in Europe.
According to media reports, as governments and public utilities compete for energy, the tight supply of natural gas in Europe and Asia may have a chain reaction to diesel, coal and electricity.
The sharp drop in Texas prices came from the maintenance and maintenance plan of Kinder Morgan, North America's largest energy infrastructure company, for its two important gas pipelines in the Gulf of Mexico.
In fact, insufficient pipeline capacity is a long-term problem that has plagued natural gas producers in the Permian Basin for many years. As the blocking points in the pipeline have existed for a long time, Campbell Faulkner, chief data analyst of OTC Global Holdings LP, said that the limitation of the Permian pipeline capacity on natural gas production "has never been eased", making the region more vulnerable to sudden oversupply and price fluctuations.
The US Energy Information Administration (EIA) said in August this year that US pipeline operators and developers recently announced five natural gas pipeline projects, which are expected to increase the transmission capacity from the US Permian Basin to the demand center near the US Gulf Coast.
If completed as planned, four newly announced projects and one optimization project under construction will increase the daily production of the Permian Basin by 4.18 Bcf/d in the next two years. EIA said in its latest natural gas pipeline project tracking report that of the four newly announced projects, three are the capacity expansion of the existing pipeline, and one is the new pipeline project that has reached the final investment decision (FID).
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