By HEADLINENEWS.NEWS correspondent
U.S. spot power and natural gas prices plummeted into negative territory across Texas, California, and Arizona on Tuesday, signaling a surplus in production amidst subdued demand and ample hydropower reserves.
At the Waha hub, next-day gas prices plummeted to a three-week low of negative $2.72 per million British thermal units (mmBtu) on May 6. Next-day power prices at hubs in Arizona and Southern California plunged to one-week lows.
The dynamics driving negative prices suggest energy firms are grappling with excess power and gas production. As a result, producers find themselves in the precarious position of either reducing output, paying others to absorb surplus energy, or resorting to flaring.
Forecasts preceding this plunge had already hinted at potential downturns in gas prices at the Waha hub in West Texas. These predictions materialized as Kinder Morgan initiated seasonal maintenance on pipelines connecting the Permian to the Gulf Coast. Reductions in pipeline flows, coupled with ongoing maintenance activities, compounded the downward pressure on prices.
These developments come against the backdrop of typically subdued power and gas prices in the spring, fueled by mild weather and enhanced hydropower supplies.
As market participants grapple with these unprecedented developments, attention now turns to upcoming meetings of OPEC+ and the Federal Reserve. These pivotal events are expected to provide insights into global oil supply dynamics and interest rate trajectories, respectively, further shaping the trajectory of energy markets in the coming months.
Back in March, the oversupply in the U.S. natural gas market was thought to be easing, with operators expected to cut production in response to the February price slump as prices hit a three-decade low. Despite these multi-year low natural gas prices, domestic producers in the United States continued to be optimistic about the long-term prospects of gas as a fuel.
