The Permian Basin, America's most productive oilfield, has recently experienced a significant oversupply of natural gas, a byproduct of crude oil drilling. For 89 consecutive days starting February 4, Permian gas prices at the Waha hub traded in negative territory, meaning producers had to pay customers to take their gas. In May, average cash prices at Waha were -$3.30 per MMBtu, due to insufficient pipeline capacity to transport the surging gas volumes. This led to significant financial losses for producers, with Targa Resources and Kinetik Holdings alone reporting up to 620 million cubic feet per day (MMcf/d) of gas being shut in or flared, as it was more economical to not produce it.
The recent expansion of Kinder Morgan's Gulf Coast Express (GCX) pipeline, which added 570 MMcf/d of capacity, has provided some relief. This $455 million project, operational since June 9, increased GCX's total throughput to approximately 2.55 Bcf/d. The new capacity was fully subscribed under long-term agreements. Following its activation, Waha spot prices traded positively for the first time in months, improving the June cash average to -$0.24 per MMBtu, a significant recovery from spring lows that approached -$5 per MMBtu. However, the basis differential between Waha and Henry Hub still remains over $3.00, indicating that takeaway capacity is not fully caught up to production.
Despite the temporary alleviation, the Permian gas market is expected to remain oversupplied and infrastructure-constrained until later this year, primarily due to ambitious future drilling plans. Permian gas production reached 27.7 Bcf/d in 2025 and is projected to average 28 Bcf/d this year, with the US EIA forecasting an increase to 30.2 Bcf/d by December. New pipeline projects, including the Blackcomb Pipeline (2.5 Bcf/d, expected Q3 2026), an upsized Eiger Express Pipeline (3.7 Bcf/d), and Energy Transfer's Hugh Brinson Pipeline, are anticipated to add a combined 4.5 to 5.3 Bcf/d of takeaway capacity over the next 12 months. This represents the largest single-year expansion in the basin's history, but the market remains cautious, with analysts suggesting that negative pricing could persist for much of the spring until these additional capacities come online in late 2026 and 2027.
