Permian natural gas benchmark Waha revisited negative territory for the third time this month, with a settle of minus $4.74/MMBtu for Tuesday’s gas day. Negative supply prices aren’t new to Permian producers, at least for gas — Waha settled as low as minus-$5.75/MMBtu in early April 2019.
I’m well aware of the negative numbers but to think anybody in the business actually released gas or oil at those numbers is foolish. Nobody in their right mind would do that. I just shut down all production for a couple of months as did most of the other producers and the prices came back. The good thing about oil and gas is it ain’t going anywhere unless I let it. If I don’t like the price I’m getting I just shut it in until I find a price I can live with. We don’t have to produce. If gold dropped down to a dollar an ounce you think anybody would sell? Stupidity!
I BELIEVE What you are referring to is a FUTURES CONTRACT.
No producer actually PAID someone to deliver natural gas to them.
We saw West Texas Crude FUTURES Contract prices go Negative in the last day of the May contract. There was no actual place to take delivery of crude oil coming from West Texas. Therefore, they had to pay someone to take their oil. There was an actual British trading firm that took delivery of that oil and was PAID to take it. The owners of those FUTURES contracts could not SELL them to anyone at $.01/barrel. Therefore, the spot price on the NY Merch Exchange went negative.
At the time there were lots of tankers anchored in the Gulf and no refinery had any storage capacity. There was one British trading firm that had purchased storage capacity. They ended up actually getting PAID to purchase their contracts.
The actual producer of the oil had probably sold these contracts months prior. Some speculator bought these contracts because they thought they were TOO cheap. They had to go up in price. They did not. They received a margin call and the MERC auctioned off their contracts most likely.