May 4

5/4 – Twenty percent of the world trade in liquid natural gas (LNG) must pass through the Strait of Hormuz. With the Strait blocked, natural gas futures in Europe are up over 40%, and in Asia it’s closer 80%. But here in the U.S., prices have plummeted. That’s because high crude oil prices have encouraged producers in the West Texas Permian Basin to push oil output to record highs, with natural gas as a byproduct. Since pipelines are at capacity, the excess natural gas must be “flared” or burned-off just to get rid of it. The U.S. Henry Hub benchmark for natural gas, which was trading in the $3.20s in early March, is down to $2.78 per million British thermal units (mBTUs). But in the Permian, prices are literally negative – meaning producers are paying companies to take it away. Lower natural gas prices should help ease the recent run-up in consumer utility prices related to new data centers and infrastructure repair/upgrades.