Natural gas spot prices on the Waha hub in western Texas, situated close to Permian basin production activities, closed at $1.55/MMBtu on August 15, the highest rate since March 2019. This price increase coincides with the 2 Bcfd Gulf Coast Express Pipeline (GCX) preparing to enter service. GCX will present much-needed further natural gas takeaway pipeline capability in the Permian region of western Texas and southeastern New Mexico.
Limited natural gas pipeline takeaway capability in the area has saved costs very low or negative in current months. In the first eight months of 2019 (by August 19), the Waha spot value averaged simply $0.65/MMBtu. The Waha spot price has been persistently lower than the Henry Hub spot value, the national benchmark value for natural gas. Nonetheless, in latest days, that differential has considerably decreased, with Waha spot costs closing $0.59/MMBtu decrease than the Henry Hub spot worth final Thursday, the lowest daily differential since mid-March. This differential averaged between $2 and $3/MMBtu between March and June of this year.
This latest uptick within the Waha value coincides with flows on the GCX; deliveries into the pipeline started on August 8. S&P Global Platts reported that shipments at El Paso Natural Gas Pipeline’s interconnection with GCX reached practically 0.26 Bcfd on August 14, a sign that GCX is packing its traces in anticipation of coming into service late subsequent month, based on trade reports, ahead of its introduced in-service date of October 1. As soon as totally operational, the pipeline will be capable of sending about 2.0 Bcfd of natural gas eastward to the Agua Dulce receipt point near the Texas Gulf Coast.