Record-breaking 78 consecutive days of negative values: Permian natural gas is still "paying to stay afloat".
2026-05-28 21:30:03
On Thursday (May 28), the spot price of natural gas at the Oaha hub in West Texas, USA, closed at -46 cents per million British thermal units (MMBtu), a significant rebound from the previous trading day's -$2, marking the highest level in 16 weeks since early February. Although the absolute value remains in negative territory, the price trend has shown signs of marginal improvement. Reports from well-known institutions indicate that the main drivers of this rebound are the seasonal increase in demand during the summer and the gradual completion of spring maintenance by pipeline companies, providing more outlets for natural gas that was once "stuck" in the Permian Basin due to pipeline bottlenecks. The Oaha hub has now remained below zero for 78 consecutive trading days, marking the longest consecutive negative period on record.
The Permian shale region is the largest oil-producing basin in the United States, with natural gas primarily consisting of associated gas produced during oil extraction. When pipeline capacity cannot match the output of associated gas, surplus natural gas is forced to remain locally, causing prices to plummet below zero. A well-known institution, citing analysts, points out that negative prices "force some energy companies to pay other companies to take over the natural gas associated with their oil production," a phenomenon that itself is "a clear signal that the Permian Basin needs more natural gas pipelines."
At the corporate level, energy companies are willing to absorb losses on the natural gas side, the core logic being that crude oil sales profits are sufficient to cover these losses. In the past decade, when environmental regulations were less stringent, drillers could dispose of excess natural gas through venting or combustion, and negative prices were uncommon. However, stricter gas venting regulations in recent years have significantly reduced this option, leading to a prolonged period of negative prices. One billion cubic feet of natural gas is enough to meet the daily gas needs of approximately 5 million American households; this quantifies the current scale of the surplus in the Permian Basin, highlighting the extent of the supply-demand imbalance.
These low prices have prompted some energy companies to voluntarily reduce natural gas production, but the reduction is far from enough to reverse the overall oversupply situation.
The U.S. Energy Information Administration predicts that Permian Basin natural gas production will remain below the monthly record of 29.1 billion cubic feet per day set in December and February until July, before rising to 29.2 billion cubic feet per day in July and climbing month by month thereafter, reaching a peak of 30.2 billion cubic feet per day in December—a level that is almost one-third of the total daily natural gas consumption in the United States.
More pipelines will come online this year. A well-known institution, citing analysts, predicts that with the new pipelines operational, coupled with factors such as oil price trends and the situation in Iran prompting producers to increase extraction efforts, natural gas production in the Permian Basin will significantly increase in the second half of 2026. However, given the current pace of pipeline construction, it is still insufficient to fully process all the natural gas already extracted underground, and the short-term supply-demand mismatch is unlikely to be completely reversed.
From an annual perspective, the average daily price at the Oha hub first fell below zero in 2019. There were 17 negative days in 2019, 6 in 2020, only 1 in 2023, a sharp increase to 49 in 2024, 39 in 2025, and a staggering 87 so far in 2026. The average Oha gas price in 2026 is projected to be negative $2.38 per million British thermal units (MMBtu), significantly lower than the $1.15 in 2025 and the five-year average of $2.88.
The increasing frequency of negative prices indicates that the pipeline bottleneck is not a short-term, isolated event, but rather a result of the ongoing structural problems in Permian Basin production. It's worth noting that surging data center electricity demand, pipeline exports to Mexico, and the expansion of global LNG sales are all boosting the long-term demand fundamentals for natural gas—however, the direct impact of this increased demand on local supply and demand in the Permian Basin is limited, and it cannot bypass the core constraint of pipeline capacity bottlenecks. The focus going forward is on whether the new pipelines scheduled to come online in July can be completed as planned, and whether the summer peak electricity demand will be sufficient to absorb the increased production. If the release of pipeline capacity is slower than expected, the negative price range may persist for a longer period; conversely, prices are expected to gradually return to positive territory in the second half of 2026.
Why are there negative gas prices at the Oha Hub?
The Vaha Hub is located in the core region of the Permian Basin in West Texas, where natural gas is primarily associated with petroleum. Due to insufficient pipeline capacity, a large amount of natural gas cannot be transported out in a timely manner, resulting in a severe oversupply and causing prices to fall below zero. Energy companies are willing to bear losses on natural gas, provided that profits from crude oil sales are sufficient to cover these losses. If oil prices fall sharply, companies' ability to absorb losses will decrease accordingly, potentially forcing them to proactively reduce production.
What does 78 consecutive days of negative values mean?
This is the longest consecutive period of negative gas prices since Oha first experienced negative gas prices in 2019. In comparison, the previous record for the most negative days in a single year was 49 days in 2024, while the first five months of 2026 alone already saw 87 days. This data indicates that pipeline bottlenecks have not eased with new capacity additions, but rather have been exacerbated by the continued increase in production. The longer the negative prices persist, the greater the cash flow pressure on small and medium-sized producers in the region.
Will the commissioning of the new pipeline completely solve the problem?
The EIA predicts that Permian Basin production will gradually climb from an average of 29.1 billion cubic feet per day before December to a peak of 30.2 billion cubic feet per day in December, following the commissioning of new pipelines in July. However, analysts point out that the pace of pipeline construction is still insufficient to fully process all currently extracted natural gas. While new pipelines can alleviate pressure marginally, given the simultaneous increase in production, negative prices are unlikely to be completely eliminated in the short term.
How do oil price trends affect negative natural gas prices?
The core logic behind the current negative prices is "oil supporting natural gas." If oil prices remain high, companies have sufficient profit margins to tolerate losses from associated gas, and negative prices may continue. However, if oil prices fall sharply, companies will find it difficult to bear the double losses, and may proactively reduce drilling activities or take more aggressive production cuts, which would actually help restore the natural gas supply and demand balance. Therefore, oil prices are an important leading indicator for judging the turning point of the Vahara price.
Can data centers and LNG exports change the current landscape?
Surges in data center electricity demand, pipeline exports to Mexico, and the expansion of global LNG sales are all boosting the long-term demand fundamentals for natural gas. However, these incremental demands have limited direct impact on local supply and demand in the Permian Basin—natural gas must first be transported via pipeline to reach these demand areas, and pipeline capacity is currently the core bottleneck. Therefore, the progress of pipeline infrastructure expansion remains the most critical variable determining the price trend of the Oaxaca.
The root cause of negative gas prices: the dilemma of associated gas and structural contradictions.
The Permian shale region is the largest oil-producing basin in the United States, with natural gas primarily consisting of associated gas produced during oil extraction. When pipeline capacity cannot match the output of associated gas, surplus natural gas is forced to remain locally, causing prices to plummet below zero. A well-known institution, citing analysts, points out that negative prices "force some energy companies to pay other companies to take over the natural gas associated with their oil production," a phenomenon that itself is "a clear signal that the Permian Basin needs more natural gas pipelines."
At the corporate level, energy companies are willing to absorb losses on the natural gas side, the core logic being that crude oil sales profits are sufficient to cover these losses. In the past decade, when environmental regulations were less stringent, drillers could dispose of excess natural gas through venting or combustion, and negative prices were uncommon. However, stricter gas venting regulations in recent years have significantly reduced this option, leading to a prolonged period of negative prices. One billion cubic feet of natural gas is enough to meet the daily gas needs of approximately 5 million American households; this quantifies the current scale of the surplus in the Permian Basin, highlighting the extent of the supply-demand imbalance.
These low prices have prompted some energy companies to voluntarily reduce natural gas production, but the reduction is far from enough to reverse the overall oversupply situation.
New pipeline additions and second-half production outlook
The U.S. Energy Information Administration predicts that Permian Basin natural gas production will remain below the monthly record of 29.1 billion cubic feet per day set in December and February until July, before rising to 29.2 billion cubic feet per day in July and climbing month by month thereafter, reaching a peak of 30.2 billion cubic feet per day in December—a level that is almost one-third of the total daily natural gas consumption in the United States.
More pipelines will come online this year. A well-known institution, citing analysts, predicts that with the new pipelines operational, coupled with factors such as oil price trends and the situation in Iran prompting producers to increase extraction efforts, natural gas production in the Permian Basin will significantly increase in the second half of 2026. However, given the current pace of pipeline construction, it is still insufficient to fully process all the natural gas already extracted underground, and the short-term supply-demand mismatch is unlikely to be completely reversed.
Historical data comparison and trend judgment
From an annual perspective, the average daily price at the Oha hub first fell below zero in 2019. There were 17 negative days in 2019, 6 in 2020, only 1 in 2023, a sharp increase to 49 in 2024, 39 in 2025, and a staggering 87 so far in 2026. The average Oha gas price in 2026 is projected to be negative $2.38 per million British thermal units (MMBtu), significantly lower than the $1.15 in 2025 and the five-year average of $2.88.
The increasing frequency of negative prices indicates that the pipeline bottleneck is not a short-term, isolated event, but rather a result of the ongoing structural problems in Permian Basin production. It's worth noting that surging data center electricity demand, pipeline exports to Mexico, and the expansion of global LNG sales are all boosting the long-term demand fundamentals for natural gas—however, the direct impact of this increased demand on local supply and demand in the Permian Basin is limited, and it cannot bypass the core constraint of pipeline capacity bottlenecks. The focus going forward is on whether the new pipelines scheduled to come online in July can be completed as planned, and whether the summer peak electricity demand will be sufficient to absorb the increased production. If the release of pipeline capacity is slower than expected, the negative price range may persist for a longer period; conversely, prices are expected to gradually return to positive territory in the second half of 2026.
Frequently Asked Questions
Why are there negative gas prices at the Oha Hub?
The Vaha Hub is located in the core region of the Permian Basin in West Texas, where natural gas is primarily associated with petroleum. Due to insufficient pipeline capacity, a large amount of natural gas cannot be transported out in a timely manner, resulting in a severe oversupply and causing prices to fall below zero. Energy companies are willing to bear losses on natural gas, provided that profits from crude oil sales are sufficient to cover these losses. If oil prices fall sharply, companies' ability to absorb losses will decrease accordingly, potentially forcing them to proactively reduce production.
What does 78 consecutive days of negative values mean?
This is the longest consecutive period of negative gas prices since Oha first experienced negative gas prices in 2019. In comparison, the previous record for the most negative days in a single year was 49 days in 2024, while the first five months of 2026 alone already saw 87 days. This data indicates that pipeline bottlenecks have not eased with new capacity additions, but rather have been exacerbated by the continued increase in production. The longer the negative prices persist, the greater the cash flow pressure on small and medium-sized producers in the region.
Will the commissioning of the new pipeline completely solve the problem?
The EIA predicts that Permian Basin production will gradually climb from an average of 29.1 billion cubic feet per day before December to a peak of 30.2 billion cubic feet per day in December, following the commissioning of new pipelines in July. However, analysts point out that the pace of pipeline construction is still insufficient to fully process all currently extracted natural gas. While new pipelines can alleviate pressure marginally, given the simultaneous increase in production, negative prices are unlikely to be completely eliminated in the short term.
How do oil price trends affect negative natural gas prices?
The core logic behind the current negative prices is "oil supporting natural gas." If oil prices remain high, companies have sufficient profit margins to tolerate losses from associated gas, and negative prices may continue. However, if oil prices fall sharply, companies will find it difficult to bear the double losses, and may proactively reduce drilling activities or take more aggressive production cuts, which would actually help restore the natural gas supply and demand balance. Therefore, oil prices are an important leading indicator for judging the turning point of the Vahara price.
Can data centers and LNG exports change the current landscape?
Surges in data center electricity demand, pipeline exports to Mexico, and the expansion of global LNG sales are all boosting the long-term demand fundamentals for natural gas. However, these incremental demands have limited direct impact on local supply and demand in the Permian Basin—natural gas must first be transported via pipeline to reach these demand areas, and pipeline capacity is currently the core bottleneck. Therefore, the progress of pipeline infrastructure expansion remains the most critical variable determining the price trend of the Oaxaca.
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