Permian Basin gas prices are expected to remain volatile until new pipeline capacity becomes operational in late 2026 or early 2027. While the recent addition of the 2.5 Bcf/d Matterhorn pipeline has eased some pressure, much of its impact has already been reflected in future pricing.
The forward pricing curve for Waha gas, shown above, highlights this uncertainty. Between spring 2025 and early 2026, forward prices show a wide $2 range between the highest and lowest estimates. However, as additional pipeline capacity of 4.5 Bcf/d comes online in late 2026, the Waha discount to Henry Hub is expected to narrow.
Mid-2025 to Late 2026: A Risky Period for Producers
Producers face a challenging period from mid-2025 through late 2026. If production grows enough to fill the new greenfield pipeline expected in 2025, Waha prices could again face significant pressure. During times of low demand or pipeline maintenance—similar to events in 2024—the basin would have little room to manage excess supply.
By 2027, the situation is likely to improve. A wave of new long-haul pipeline projects is expected to ease the pressure on gas prices, reducing the risk of steep discounts and improving overall price stability.
Forward Curve Trends and Production Growth
The Waha forward pricing curve has been declining over the past six months, even after the commissioning of a new pipeline in October. The current curve, represented by the dark blue line in the chart, shows lower prices compared to three months ago (light blue) and six months ago (grey). This trend raises questions about the curve’s ability to predict future pricing accurately, especially for 2025 and 2026.
One key factor driving concern is the rapid growth of Permian gas production. Analysts and industry observers note that production has been increasing faster than expected. This higher-than-anticipated growth could mean the new Matterhorn capacity fills up sooner, leaving less room to accommodate further increases.
Pipeline Projects Offer Hope Beyond 2026
The additional 4.5 Bcf/d of pipeline capacity expected by late 2026 includes projects like GCX Expansion, Blackcomb, and Hugh Brinson, all of which have reached a final investment decision (FID). These projects are crucial for alleviating the bottlenecks in West Texas.
Looking Ahead: Overcapacity May Finally Arrive
Permian producers should remain cautious about relying on better Waha pricing. Historical trends show that prices tend to decline rather than rise. However, starting in 2027, the region may finally reach a state of overcapacity. With at least 4.5 Bcf/d of new pipelines set to come online, the Permian Basin could achieve greater price stability and reduced risks for producers.
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