The war in Iran has choked natural gas supplies across Europe and Asia, leading to fuel rationing and blackouts, but in the heart of US shale country, the market is swimming in supply.<\/p>\n
Gas in the Permian Basin of West Texas and New Mexico is so plentiful that producers are having to pay buyers to get rid of it.\u00a0Bloomberg reports<\/a>\u00a0that there is so much inventory that it exceeds available pipeline capacity. \u201cPrices aren\u2019t merely cheap, they\u2019re negative,\u201d states the April 29 article, noting that Permian gas hit an all-time low of -$9.60 per million British thermal units on April 24.<\/p>\n In the Permian, gas prices have dipped below zero intermittently since 2019 as pipeline construction failed to keep pace with soaring production. But this year, negative pricing has been more pronounced than ever.<\/em><\/p>\n US natural gas futures have slipped 10% since the Middle East conflict began, a situation that contrasts sharply with Europe, where prices are up about 40%, and Asia, where they\u2019ve jumped more than 50%.<\/p>\n The gas glut is creating winners and losers.<\/p>\n For Permian producers like Diamondback Energy (NASDAQ;FANG), low prices have been a drag on profits. In an earnings call, executives said they are \u201cconsciously moving away from Waha,\u201d the Permian pricing hub, and increasing their exposure to higher-priced markets near population centers, export facilities and planned data centers.<\/p>\n Related: Sinopec Opens Major Ultra-Deep Shale Gas Play in China<\/a><\/strong><\/p>\n EQT Corp (NYSE:EQT) has curtailed output due to persistently low spot prices.<\/p>\n The silver lining in this low-priced cloud? The US economy. Not only are lower natgas prices insulating the United States from war-driven energy shocks, but they are also creating an economic tailwind.<\/p>\n Cheap supplies of gas \u2014 a key manufacturing input and a major player in meeting power demand from artificial intelligence \u2014 stand to give the US an edge over countries facing fuel shortages.<\/em><\/p>\n Petrochemical producers like Dow are among the companies benefiting from low-cost industrial gas, Bloomberg reports.<\/p>\n While Americans are facing inflation across most goods and services, electricity prices would be higher if it wasn\u2019t for the natural gas glut. In March\u2019s CPI inflation numbers, utility gas prices fell 0.9%.<\/p>\n Anna Wong, chief economist at Bloomberg Economics, believes\u00a0The divergence between gas prices in America and the rest of the world \u201ccould mean the US economy will prove more resilient than expected this year. Natural gas is more important to the manufacturing sector \u2014 particularly chemicals, fertilizers, electricity \u2014 than crude oil is.\u201d<\/em><\/p>\n Of course, the gas glut won\u2019t last forever.<\/p>\n Forward prices for Waha gas are shown flipping to positive in October, around the time that the\u00a0Blackcomb Pipeline<\/a>\u00a0enters service, with five new Permian conduits set to bring about 11 billion cubic feet a day of capacity by the end of 2028. While that amounts to roughly 10% of US gas production, Bloomberg concludes that\u00a0abundant shale production and limited export capacity mean US gas prices are poised to remain low relative to the rest of the world for years to come. Gas will average well below $4 through 2027, American government forecasts show, while production is poised to hit fresh records.<\/em><\/p>\n