Natural gas prices in Texas shale country just turned negative amid booming production

• In the Permian Basin, natural gas for next-day delivery sank to negative $2 per million British thermal units, traders told Bloomberg.
• That's the first time that has happened since 2020, when the early onset of the COVID pandemic sent commodity prices tumbling.

West Texas natural gas prices turned negative for the first time since 2020 on Tuesday, as booming production and pipeline-capacity constraints left local supplies with nowhere to go.

At the Waha hub in the Permian Basin, gas for next-day delivery sank to negative $2 per million British thermal units Tuesday, traders told Bloomberg. Just a week ago, prices there were $5 per million BTUs, and benchmark US prices are currently at $5.55.

That means gas producers are paying people to take their supplies. Prices in the heart of Texas shale country were negative eight times times in 2020 and more than two dozen times in 2019, according to data compiled by Bloomberg.

The latest bout in the red comes as the region is seeing a surge in production, lower demand, and distribution bottlenecks, resulting in a localized glut.

Production in the US has skyrocketed so far this year, driven in large part by the energy crisis in Europe and the loss of Russian gas.

But Europe has nearly maxed out on filling up stockpiles, lowering demand. Moderate temperatures have also dampened consumption.

Meanwhile, seasonal maintenance on pipelines that move gas supplies from Texas to the rest of the country have exacerbated pre-existing distribution bottlenecks.

And regulators in the US are also adding to the glut, due to a limit on how much producers can burn off excess gas through a process known as flaring.