Permian Gas Breaks Free, but the Supply Pressure Moves Downstream

Waha prices were deeply negative for an extended period as rising Permian production repeatedly overwhelmed available takeaway capacity. That pressure has eased since June following the completion of Kinder Morgan's Gulf Coast Express expansion. The project added approximately 570 MMcf/d of capacity, lifting total throughput to roughly 2.6 Bcf/d and extending another route from Waha to Agua Dulce in South Texas. The first phase of Hugh Brinson, adding 1.5 Bcf/d, has now begun flowing ahead of schedule, while Blackcomb is expected to enter service later this year. Together, the three projects will add roughly 4.5 Bcf/d of Permian takeaway capacity once fully operational, sharply reducing the risk of chronic congestion. Waha cash prices have recently stabilized near $2/MMBtu, a striking reversal from the negative $6–9/MMBtu levels recorded in late April. However, the hefty increase in associated-gas supply is pushing the national market further away from balance. Overall supply remains abundant, while demand has fallen short of expectations. July's blistering temperatures did not produce a comparable increase in gas-fired generation. Power burn finally caught up during the August heatwave, but the late-season surge was not enough to erase the storage surplus. Robust production absorbed much of the weather-driven demand, while LNG feedgas offered only limited support amid facility maintenance. The heat tightened individual days but failed to reset the seasonal balance, keeping Henry Hub well below $3/MMBtu. The next question is how much incremental supply these new pipelines will unlock—and how much additional pressure it will place on the market. Blackcomb and Hugh Brinson could ramp up relatively quickly because both are backed by long-term shipper commitments. Removing the bottleneck also creates room for further Permian production growth, leaving few technical constraints on supply in the near term. The constraint will increasingly shift from pipeline capacity to market economics: is there enough downstream demand to soak up the additional gas? Supply-driven curtailments are unlikely to provide the answer in this region. Most Permian gas is produced alongside crude oil, making it a byproduct of oil-directed drilling. As long as oil production remains economic, operators have little incentive to reduce drilling simply to rebalance the gas market. Weak gas prices may hurt realized revenue, but they are unlikely to halt associated-gas growth. That creates a difficult near-term setup. Structural demand from new LNG terminals and power projects has yet to materialize fully, leaving the market heavily reliant on weather. The August heatwave has already shown that even exceptional temperatures may struggle to overcome robust supply. If winter heating demand disappoints—particularly under a strong El Niño pattern—the pressure would shift away from Waha and toward downstream Texas hubs and Henry Hub. Over a longer horizon, however, the Permian's resilient production and low-cost gas should attract more demand. That process is already underway: several Texas Gulf Coast LNG projects have reached FID, while expanding power generation and data-center development support the region's demand outlook and another round of infrastructure investment. Blackcomb and Hugh Brinson are therefore not the end of the buildout. Eiger Express is expected to transport up to 3.7 Bcf/d from the Permian to Katy in 2028–29. The Desert Southwest project would open another outlet toward Arizona and New Mexico in late 2029. The newly sanctioned Solitude Pipeline System could add another 4.5 Bcf/d toward Katy in two phases beginning in late 2029 and 2030. The critical issue is timing. If pipelines arrive before the LNG, power and industrial projects intended to absorb their gas, the Permian could move from chronic congestion to excess takeaway capacity. Individual pipelines may still fill through contractual commitments, but some volumes would merely shift away from older systems. Waha is finally escaping chronic congestion, but the Permian surplus may not disappear completely. It is becoming more mobile—and the next pressure point will be where that gas lands. By Tracy Cui