Oil Price Crashes -$56; First Time in History Sellers Pay Buyers
Frankly, we’re speechless. Yesterday the price of West Texas Intermediate (WTI) oil for near-term May contracts went from trading at $18.27 per barrel (bbl) to minus $37.63, a drop of $55.90 in a single day. This is the first time in history sellers of oil in the U.S. (more properly the contracts to buy oil) are paying buyers to accept it–because the sellers have no place to store physical oil should they keep the contracts. This is a complete and utter meltdown in the oil market. Trading for May contracts ends today, thank God. The June contract is (so far) showing deals trading at $15.59/bbl. That’s still a disaster, but not as bad as paying someone else to take the oil! What caused this price crash, and where does it go from here?
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Although the NYMEX futures price for natural gas zoomed up to $1.92 per thousand cubic feet (Mcf) yesterday, the price for natgas didn’t go up everywhere. As you know, there is no one price for natural gas, although the most quoted price is the Henry Hub benchmark. Yesterday at the Waha trading hub in West Texas (the Permian Basin), the traded price for natgas sunk to a new, historic low: -$7.67/Mcf. It closed the day at -$5.79/Mcf. That is, sellers were paying buyers to take their gas. Why?
With yesterday’s historic crash in the price of West Texas Intermediate (WTI) oil comes a big boost in the stock price for a number of Marcellus/Utica drillers. As we’ve outlined multiple times, but will repeat here again, stock traders believe that with the crash in oil prices and U.S. shale oil drillers laying down rigs faster than we can count, the high volume of “associated gas” coming from the oilfields will vastly decrease. That means less supply in the market. With less supply and the same (or increasing) demand comes higher prices for natgas. And higher prices for natgas means more profits and likely more new drilling for Marcellus/Utica drillers. Hence, investors are snapping up stocks for M-U drilling companies.
In early 2018, the federal EPA approved a new Marcellus wastewater injection well for the Pittsburgh suburb of Plum Boro (see 
There is an ongoing question of whether or not the Ohio Marketable Titles Act (MTA), which impacts Utica shale rights, can be used to return previously severed mineral rights back to a surface landowner, or whether the MTA is superseded by Ohio Dormant Minerals Act (DMA). In February 2019, Ohio’s Seventh District Court of Appeals said the MTA *does* still apply to mineral rights (see 
Spectra Energy’s Algonquin Incremental Market (AIM) pipeline project is an $876 million expansion of the existing Algonquin pipeline system designed to carry 342 million cubic feet of natural gas per day to New England states that badly need the gas. On March 3, 2015, the Federal Energy Regulatory Commission (FERC) issued its final approval for the project, allowing the project to go forward. Construction began in 2015 and, following extreme opposition from New York State over a small portion of the project, it finally went online in 2016.
Some exciting news is chronicled in a recent post by our favorite government agency, the U.S. Energy Information Administration (EIA). Last year, in 2019, the United States exported more energy (oil, natural gas, coal, and petroleum products) than it imported. That’s the first time we’ve exported more than imported in 67 years!
MARCELLUS/UTICA REGION: PA House Republicans put language stopping new environmental regs in another bill; Nicholas S. Haden: Tariffs pick winners and losers in U.S. energy sector; OTHER U.S. REGIONS: NJ Transit natural gas plant in Kearny gets green light; NATIONAL: Halliburton cuts capex by half, reduces workforce, with bottom in 2Q; A hunt for any storage space turns urgent as oil glut grows; Biden says he’s open to ‘expanding’ his climate plan to win over young voters; INTERNATIONAL: Russia races to squeeze the U.S. out of Asian natural gas markets.