Citigroup: The Permian Basin will become the largest natural gas producing region in the U.S. The surge in "associated gas" may weaken the long-term bullish logic for gas prices.

The "heart" of America's shale revolutionthe Permian Basinis moving toward a historic turning point. According to the latest forecasts from Citigroup analysts, by the end of this decade, this world-leading shale oil region will also become the largest natural gas production base in the United States, replacing the Marcellus Shale, which has held the top spot since 2012. The rise of the Permian Basin will alter the landscape of the U.S. natural gas market, shifting the market's leadership to regions that are "insensitive to gas prices but sensitive to oil prices." The Permian Basin spans West Texas and southeastern New Mexico, with its natural gas primarily coming from associated gas produced during oil extraction. Unlike the Marcellus gas field, production in the Permian region is largely determined by oil prices, with natural gas being an involuntary and sometimes even unwanted byproduct. Citigroup analyst Scott Gruber stated that the Permian could potentially become the largest natural gas production region in the U.S. as early as 2030, but this timeline will partially depend on oil prices. The cost of the shale oil boom: Pipeline capacity in crisis, natural gas plunges into "negative asset" territory This year, the Permian Basin experienced an extreme phenomenon of negative natural gas prices for four consecutive months. The reasons behind this are not complicated: oil production has continued to rise, with associated gas flooding into the market, while the capacity of outbound pipelines has already reached its limit. Some producers have been forced to shut down oil wells with a high gas-to-oil ratio to reduce losses. However, this bottleneck is beginning to ease. Several newly constructed natural gas pipeline projects in Texas have recently secured funding, and their completion is expected to help alleviate the pricing imbalance. The incremental supply from the Permian will also change the status of other shale gas regions in the U.S. Major gas fields, such as Haynesville in northwest Louisiana and East Texas, will not need to significantly increase production to meet new demand in the future, as the Permian will fill the gap. More critically, with a large number of U.S. liquefied natural gas (LNG) export terminals coming online and artificial intelligence data centers generating massive electricity demand, there had been widespread market concerns that supply tightness would drive up gas prices. However, Citigroup believes that the ongoing production increase from the Permian will effectively buffer this pressure, thereby weakening the long-term bullish logic for natural gas prices.