Permian Basin Associated Gas: The 2026 Commercial Supply Anchor
Record oil drilling in the Permian Basin continues to generate massive volumes of "associated" natural gas in 2026. As new egress pipelines like the Matterhorn Express begin moving 2.5 Bcf/d of trapped West Texas gas to the Gulf Coast, this surplus supply acts as a critical bearish anchor against rising national Henry Hub spot prices—creating a brief strategic buying window for commercial procurers.
Executive Procurement Impact
- →The Inelastic Supply Paradox: Because drillers are primarily chasing $70+ oil, natural gas is extracted regardless of market demand. This forces localized prices deep into negative territory (paying to take gas away).
- →Gulf Coast Floor Pricing: Pipeline expansions are finally moving this cheap gas to Houston and Louisiana, keeping a lid on the near-term Henry Hub price ahead of the massive Q4 LNG capacity expansion.
- →The Hedging Window: Commercial buyers outside of Texas should view this localized oversupply as the primary reason spring 2026 natural gas strips remain affordable before structural export demand takes over.
The Oil-Driven Gas Glut
The Permian Basin (spanning West Texas and Southeastern New Mexico) is the premier oil producing region in the United States. However, underneath that oil is a staggering amount of natural gas. When drillers extract crude to capture high global oil prices, the natural gas comes up with it—this is known as "associated gas."
Because natural gas is a secondary byproduct in this basin, production is entirely price-inelastic. Drillers will not stop pumping oil just because natural gas prices crash. In fact, throughout early 2024 and repeating in early 2026, spot natural gas prices at the Waha Hub (the main Permian pricing point) frequently drop below $0.00/MMBtu. Producers literally pay gathering companies to take the gas away so they can keep drilling oil.
Pipeline Relief: The Matterhorn Effect
For a buyer sitting in Chicago or Philadelphia, negative prices in West Texas historically meant nothing if they couldn't physically access the supply due to pipeline bottlenecks (a "constrained egress" situation).
However, 2025 and 2026 marked a pivotal shift in midstream infrastructure. The Matterhorn Express Pipeline and subsequent capacity expansions have collectively unlocked billions of cubic feet per day of capacity, moving trapped Waha gas eastward toward the Katy Hub (Houston) and onward to the national pipeline network.
| Pricing Hub | Status / Constraint | National Price Impact |
|---|---|---|
| Waha Hub (West TX) | Extreme oversupply; negative pricing risk | Bearish (Suppresses prices) |
| Katy Hub (Houston) | Receiving new Matterhorn flows | Bearish (Suppresses prices) |
| Henry Hub (National) | Balancing point for incoming Permian vs outgoing LNG | Stabilized (Near-term) |
The Tug-of-War: Permian Gas vs. LNG Exports
The current US natural gas market is a massive tug-of-war between two opposing forces:
- The Anchor: Relentless associated gas production from the Permian pushing supply into the market, keeping prices low.
- The Balloon: Unprecedented Liquefied Natural Gas (LNG) export capacity coming online along the Gulf Coast (e.g., Golden Pass), demanding massive volumes of feedgas and pulling prices higher.
For commercial and industrial facilities evaluating their 2026/2027 natural gas procurement strategy, the window to act is right now. The Permian "anchor" is providing a temporary reprieve, keeping spot and short-term forward prices affordable during the spring shoulder months. But by Q4 2026, the sheer volume required by the LNG "balloon" is widely expected to lift the entire market out of its rut.
Source: U.S. Energy Information Administration (EIA) Drilling Productivity Report.
Capitalize on the Permian Supply Window
Lock in multi-year supplier agreements while associated natural gas gluts suppress the current forward curve. Don't wait for winter LNG demand to reset market baselines.