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Trump's Iran Move May Worsen US Gas Market

Trump's Iran Move May Worsen US Gas MarketTrump's Iran Move May Worsen US Gas Market

US President Donald Trump’s decision to scrap the Iran nuclear deal can be good for oil bulls but for natural gas drillers in America’s hottest shale play, it could be a disaster.

The highest oil prices in more than three years are poised to boost output from areas like West Texas’ Permian basin, the most prolific US reservoir of the fuel. That would add to the supply of gas that is produced alongside crude there, making an existing glut even bigger, World Oil reported.

A surge in oil drilling would deliver another blow to a gas market that is already America’s worst. The Permian boom has filled pipelines to capacity, trapping gas in the region and making prices there the cheapest of any major US hub.

West Texas gas prices could drop to zero on some days, according to Tudor Pickering Holt & Co., forcing explorers to shut production or burn off excess supplies in a process known as flaring. Gas is “getting incredibly cheap again versus oil and refined products”, John Kilduff, founding partner at Again Capital LLC in New York, said. Producers “are just going to try to give it away.”

Gas at West Texas’ Waha hub traded at $2.06 per million British Thermal Units Tuesday, compared with $2.7161 at the Henry Hub in Louisiana, the benchmark for futures traded on the New York Mercantile Exchange.

 

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