When Gas Pays You to Take It

Natural gas prices in the Permian Basin have traded below zero for 80% of 2026. Producers are literally paying buyers to haul away the fuel that emerges alongside their oil wells. Waha Hub spot prices have averaged below zero for eight of the last nine months , according to the EIA. Meanwhile, WTI crude traded at $71.50 per barrel on Friday , according to market data—a spread that has turned America's most productive oil field into a tale of two commodities.

The Permian's gas glut is no accident. The region is expected to produce 29.2 billion cubic feet per day in 2026, up 6% from 2025 , the EIA reports. But pipelines can't keep pace. Kinetik revised its full-year shut-in estimate upward to 220 million cubic feet per day, more than double its previous guidance of 100 million , according to industry data. Together with Targa Resources' 400 million cubic feet per day of curtailments, the two midstream operators account for 620 million cubic feet per day of shut-ins due to prices that make production uneconomic.

The absurdity is structural. Oil drillers in the Permian aren't chasing gas—it's an unwanted byproduct. The Permian region is predominantly an oil producing region where operators are influenced by crude oil prices, and most natural gas production is associated gas , the EIA notes. When oil fetches $70 or $90 per barrel, wells keep pumping regardless of what gas does. The result: through the end of February, Waha cash prices were negative on 46 of 59 flow days, about 80% of the time , Natural Gas Intel reported.

Will More Pipes Fix This?

Relief is coming, but slowly. Energy Transfer indicated that the Hugh Brinson Pipeline could begin moving volumes in early third quarter 2026, ahead of its full 1.5 billion cubic feet per day first-phase service date in the fourth quarter . Kinder Morgan's GCX expansion and the Blackcomb Pipeline are still expected to enter service in the second and fourth quarters of 2026, respectively . Together, the three projects would add roughly 4.5 billion cubic feet per day of takeaway capacity—enough to absorb the surplus and then some.

But the forward curve tells a different story. The forward curve projects deep discounts through October before meaningful narrowing at year-end, with Waha basis for November at negative $2.05 and December at negative $1.10 , according to Natural Gas Intel data. Traders aren't betting on a quick fix. And there's a darker possibility: The rise in oil prices near $100 per barrel has led to increased forecasts for US crude from the Permian, meaning expectations of gas supply are greater than pre-war estimates , adding pressure to certain parts of the curve.

The paradox is global. Global near-month futures prices have remained elevated amid the closure of the Strait of Hormuz, with price spreads between US and international prices narrowing in April but remaining wider than before the closure , the EIA reported. Europe and Asia are scrambling for molecules. The Permian has them in abundance. But stranded gas 1,500 miles from a Gulf Coast export terminal might as well be on Mars.

Why Aren't Drillers Flooding the Market?

Oil at $96 should be a green light for drilling. It isn't. Continental Resources founder Harold Hamm announced plans to put drilling crews back to work in North Dakota after the company paused new drilling in January, marking the first time in 30 years Continental didn't have a rig operating in the state , the North Dakota Monitor reported. Hamm said "a great deal has changed," referring to higher oil prices amid the war with Iran .

But the broader industry remains wary. Companies are tapping drilled but uncompleted wells as "a relatively quick and capital-efficient way to increase output without committing to a full new drilling cycle" , Reuters noted. US production as of early May stood at 13.7 million barrels daily, while exports surged 60% from February to 6.5 million barrels per day in April . Output is rising—just not via a rig bonanza.

The caution reflects geology as much as sentiment. Physical constraints, including shale field depletion and higher breakeven acreage, are limiting how much and how fast US production can grow despite oil prices above $100 per barrel , OilPrice.com reported. North Dakota has been averaging around 25 active rigs , state regulators said—a far cry from the boom years. State oil regulator Anderson noted the conflict "signals that there's some certainty around a little higher price for a little bit longer" , but emphasized the measured response.

Who Loses When Gas Is Free?

Colombia, for one. The Andean country is facing a severe energy crisis as global natural gas supply is heavily constrained due to the Strait of Hormuz closure, at a time when domestic production is declining and demand is surging , OilPrice.com reported. Colombia's March 2026 natural gas production rose 0.7% month-over-month to 700 million cubic feet but represented a nearly 15% decline year-over-year—38% lower than a decade earlier .

The country has become an LNG importer by necessity. By the end of 2025, 18% of Colombia's natural gas supply was sourced from imports, originally expected to grow to 26% in 2026 but now potentially expanding to 33% due to dwindling domestic output. The average price of imported natural gas climbed 26% from $14.64 to $18.39 per million BTU, with industrial gas costs soaring 69% in 2025 while household prices surged 23% .

Iran disrupted roughly a fifth of Qatar's LNG production, and the Strait of Hormuz closure affects about 20% of global natural gas shipments annually , tightening supply precisely when Colombia needs it most. The country that was self-sufficient in 2016 now faces a structural dependency on the most volatile segment of the global gas market.

Could Malaysia Become the Next Singapore?

Amid the chaos, infrastructure is being revalued. Malaysia's Maharani Freeport could emerge as a strategic offshore storage and ship-to-ship transfer hub , OilPrice.com reported. As energy trade becomes increasingly shaped by geopolitical risk, projects offering secure storage, blending, bunkering, and emergency rerouting capabilities may become some of the most valuable assets in the global energy system .

The logic is straightforward: Until the Iran War, global oil and gas markets were built on the assumption that the Strait of Hormuz would always remain open, and Asia's entire energy security architecture was designed around that assumption . That assumption is dead. The Strait of Hormuz crisis has fundamentally altered how Asian buyers think about energy security, with repeated military escalations creating pricing distortions, raising insurance premiums, delaying cargoes, and increasing financing costs .

Malaysia's advantage is optionality. The country has strong natural gas reserves, ranking 24th globally, and was the world's fifth biggest exporter of LNG in 2023 . It's neither a pure importer nor locked into rigid export contracts. In a world where shipping routes close without warning and cargoes need to be rerouted mid-voyage, flexible infrastructure commands a premium.

What Changed This Week

Brent crude rose 0.5% to $75.20 per barrel while Henry Hub natural gas fell 2.4% to $3.25 per million BTU , according to market data—a divergence that reflects fundamentally different supply stories. North Dakota's Continental Resources reversed its drilling pause, signaling confidence in sustained higher prices. But the broader US shale patch remains cautious, tapping inventory rather than adding rigs aggressively. Meanwhile, Permian gas producers are counting days until new pipelines arrive in the fourth quarter.

What to Watch

The Hugh Brinson Pipeline's early third-quarter startup will be the first test of whether new takeaway capacity can pull Waha prices out of negative territory. Colombia's LNG import dependency will be closely watched as a bellwether for how Hormuz disruptions cascade through smaller importers. And Continental Resources' return to drilling in North Dakota—expected later this year—will signal whether other operators follow or whether caution remains the dominant mode. The EIA's next Short-Term Energy Outlook, due in early June, will revise Permian gas production forecasts and clarify whether associated gas growth continues to outpace pipeline builds.