Finance Association, April 12 (Editor: Xiaoxiang) There is so much natural gas extracted from gas wells in Texas in the US that producers now have to pay customers to “take” the gas from themselves...

This week, the price of natural gas at the Waha hub in the Permian Basin of the United States fell to a rare level of -2 US dollars/million British thermal...

I believe many people may be curious. Against the backdrop of today's overall rise in prices for many commodities, including energy, why is the US still showing a “negative gas price” scene?

But in fact, the reason behind this may itself be related to the sharp rise in oil prices.

Relevant industry insiders said that as the US benchmark WTI crude oil reached a nearly half-year high of 85 US dollars per barrel this week, extracting more oil at current prices is almost a matter of thousands of dollars for many oil and gas producers. Many oil and gas producers have chosen to step up their mining efforts, and have even put into operation many oil wells that have already been drilled but not yet completed.

However, many of these oil wells also produce large amounts of associated natural gas, which poses a problem: the extracted crude oil is bought by a large number of buyers, but the excess gas is not so easily digested by the market. Generally speaking, miners don't choose to burn off excess gas because this poses environmental issues and the risk of increasing greenhouse gas emissions.

Since the US gas market has just experienced an unusually warm winter, local demand itself is shrinking. Inventory levels are nearly 40% higher than the average for the past five years, and this has also caused a large amount of new supply, which has filled gas storage facilities and pipelines in a short period of time.

Dennis Kissler, senior vice president in charge of transactions at BOK Financial Securities Inc., said, “Due to rising oil prices, drillers are putting these drilled but unfinished oil wells into operation. The market was flooded with natural gas, but there wasn't much demand.”

There are already signs that an oversupply of natural gas may begin to hinder drilling activities in parts of the Permian Basin.

In fact, in the Permian Basin of the United States, this is not the first time that negative gas prices have occurred — similar negative gas prices have also occurred during the pandemic and gas pipeline maintenance phase in the past few years. However, market imbalances, which are largely due to high oil prices and high mining profits, as is currently the case, are still extremely rare.

In most parts of the US, it will take a few weeks before the air conditioning season, which stimulates demand. As a result, there aren't many things that will excite gas bulls in the short term.

However, if negative gas prices continue or intensify, oil companies may reconsider whether it is worth “spending money” to dispose of their by-products in order to extract more crude oil.