Waha: No Longer Just Giving Natural Gas Away

Key Takeaways:

• The Waha Hub spent years as one of the most distorted natural gas markets in the U.S., where producers literally have to pay to have their gas taken away — a direct consequence of oil-driven associated gas flooding a pipeline-constrained basin.
• A wave of new pipeline infrastructure is now connecting Permian gas to surging sources of demand, including LNG exports, AI-powered data centers, and Mexico, marking a structural inflection, not just a cyclical bounce.
• For Permian-focused E&P companies, this shift means finally getting paid fair value for their natural gas, reinforcing VanEck's conviction in maintaining an outsized allocation to the sector.

The Waha Hub is the benchmark for natural gas pricing in West Texas’ Permian Basin. Over the past three and half years, however, it has become known for something far less desirable: one of the most distorted natural gas markets in the United States.

For nearly 30% of that period, natural gas at Waha was worth less than nothing. Producers weren’t simply giving it away, they were paying others to take it. The market reached peak devastation on April 24, 2026 when Waha settled at -$10.03/MMBtu, an oil-equivalent price of -$58.17 per barrel.

Today, that era appears to be coming to an end.

Waha: From Negative to Positive

Source: Bloomberg. Data as of July 2026.

The irony is that this occurred in the nation’s largest oil-producing basin.

Every barrel of oil produced in the Permian also brings associated natural gas to the surface. Over the five years ending December 31, 2025, Permian natural gas production grew at a 15.9% compound annual rate, far outpacing 9.0% annual oil production growth.

Yet, producers don’t drill for natural gas, they drill for oil.

As long as oil economics remain attractive, associated gas continues to flow regardless of whether natural gas prices are positive or negative. The result was a persistent mismatch between production growth and pipeline takeaway capacity. With more gas production than pipelines could move, the excess supply pushed local prices lower year after year.

By 2024, Waha averaged $0.17/MMBtu for the entire year and traded below zero on 36% of all trading days. The Permian had become home to the cheapest natural gas on the planet.

Conditions improved modestly after the Matterhorn Express Pipeline entered service in September 2024, but the market remained fragile. In 2026, scheduled pipeline maintenance once again exposed the lack of excess takeaway capacity, resulting in 134 consecutive days of negative pricing.

Fortunately, the story is beginning to change.

After years of underinvestment in takeaway capacity, the pipeline industry is finally catching up. The first step came in May 2026, when Kinder Morgan’s Gulf Coast Express Expansion entered service. While modest in size, the project demonstrated just how responsive the market could be once additional capacity became available.

More importantly, it is only the beginning.

Over the next three years, the Permian Basin is expected to add more than 10 billion cubic feet per day of incremental takeaway capacity through a series of major pipeline projects. Together, these projects should do more than alleviate the region’s structural bottleneck. They will connect Permian gas to rapidly expanding sources of demand.

Upcoming Permian Natural Gas Pipelines Projects

Source: EIA, Data as of May 2026.

Growing U.S. LNG exports continue to increase demand for natural gas along the Gulf Coast. Electricity consumption is accelerating as data centers and artificial intelligence infrastructure require enormous amounts of reliable power. One notable example is Chevron’s recently-announced 20-year power agreement with Microsoft in West Texas. The project is expected to utilize seven natural gas turbines with 2.67 GW of generating capacity. Based on VanEck’s proprietary power model, this facility alone is expected to consume approximately 600 MMcf/d of natural gas. Meanwhile, Mexico remains an increasingly important and growing destination for U.S. natural gas exports.

The market is already recognizing this shift.

Forward Waha basis differentials to Henry Hub have tightened meaningfully as pipeline in-service dates have become more certain. Winter 2026/2027 basis is currently averaging approximately -$1.07/MMBtu, a dramatic improvement from -$3.60/MMBtu during the prior winter. While Waha will likely continue to trade at a discount to Henry Hub, the magnitude of the discount is expected to narrow considerably as new infrastructure comes online.

For Permian producers, this represents a meaningful change in economics. Companies have spent years accepting deeply discounted gas prices or in some cases curtailing production. They are finally positioned to realize materially higher value from every molecule they produce.

This is more than a cyclical recovery; it is a structural inflection point.

The chronic bottlenecks and negative price days that defined the Waha market from 2023 through first half of 2026 are giving way to a more balanced system. For the first time in years, Permian producers can reasonably expect something that once seemed impossible: getting paid a fair price for their natural gas. This improving outlook is one more reason we continue to favor an outsized allocation to Permian-focused exploration and production companies within our natural resources portfolio.