Since August, physical natural gas flows at Henry Hub have been at all-time highs for each respective month, and, in early October, they recorded the highest single-day flows that we’ve seen since December 2009. For decades, liquidity at the U.S. natural gas benchmark pricing location in southeastern Louisiana has been dominated by financial trades, with minimal physical exchange of gas, despite the hub boasting robust physical infrastructure and ample pipeline connectivity. That’s still the case, but physical movements of gas in the area have been on the rise due to LNG exports ramping up from the Sabine Pass and Cameron LNG facilities in southwestern Louisiana and a slew of Appalachia gas supply pipelines targeting that export demand. As more physical gas is moving through the hub, operational constraints are developing at key interconnects there. That, along with the ups and downs of LNG feedgas demand, is contributing to spot price volatility at the hub and, at times, a deeper divergence between Henry spot and futures prices. Today, we begin a short blog series on the changing gas flow dynamics in and around Henry.
The Henry Hub pricing location in Vermilion Parish, LA, has been the center of the natural gas spot-trading universe going back as far as the late 1980s, and is the delivery mechanism for the third-largest commodity futures trading instrument in the world — the CME/NYMEX Henry Hub natural gas futures contract. Long used as the basis for domestic gas deals, in recent years, it’s also become the benchmark for U.S. LNG export contracts. We detailed the formation, evolution, and rationale for the benchmark trading location, in our Henry the Hub, I Am I Am blog series. But the physical infrastructure at the hub has changed little over the decades, and, despite its “industry benchmark status” and highly liquid futures contract (red line using right axis in Figure 1), physical gas flows utilizing those assets (blue area on left axis) were not the driving force there. In fact, physical trade volumes at Henry (gold line, also on left axis) historically were driven less by physical flows and more by Intra-Hub Transfers (IHT), a “behind-the-scenes” accounting mechanism that gives counterparties the ability to exchange gas there through title transfers, without any physical movement of gas. Moreover, in the first half of the past decade, traded volumes — combined for physical flow and IHTs (these trades are indistinguishable) — dropped off as gas production volumes from both offshore Gulf of Mexico and western Louisiana’s Haynesville Shale declined (gray-shaded arrow).
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About the song
“Riders On The Storm” was written by Jim Morrison, Ray Manzarek, Robby Krieger and John Densmore (The Doors). The song appears as the fifth song on side two of The Doors’ sixth studio album, L.A. Woman. Released as a single in June 1971, the song went to #14 on the Billboard Hot 100 chart and #11 on the Billboard Easy Listening Singles chart. This was the last song recorded by all four band members and the last recording of Morrison's vocals. Personnel on the record were: Jim Morrison (vocals), Ray Manzarek (Fender Rhodes piano), Robby Krieger (guitar), John Densmore (drums), and Jerry Scheff (bass).
L.A. Woman was recorded in December 1970 and January 1971 at The Doors Workshop in Los Angeles, with Bruce Botnick and The Doors producing. Released in April 1971, the album went to #9 on the Billboard Top 200 Albums chart. It has been certified 2x Platinum by the Recording Industry Association of America. Two singles were released from the LP.
The Doors were an American rock band formed in Los Angeles in 1965 by Jim Morrison, Ray Manzarek, Robby Krieger and John Densmore. They were the first American band to accumulate eight consecutive Gold albums and have sold over 100 million records worldwide. The Doors have released nine studio albums, five live albums, 21 compilation albums, and 21 singles. They are members of the Rock & Roll Hall of Fame and have a Grammy Lifetime Achievement Award and a star on the Hollywood Walk of Fame. Jim Morrison died in 1971 and Ray Manzarek in 2013. Robby Krieger and John Densmore still perform occasionally as featured solo artists.
