I'm Tore Down - Supply Growth Levels Natural Gas Futures to Near 20-Year Lows

The CME/NYMEX prompt Henry Hub natural gas price yesterday settled at about $2.28/MMBtu, down 40 cents from the summer peak of $2.68 in mid-September. That’s also a long way down from the $3-plus prices seen at this time last year. What’s more, daily prompt-month contract settlements this injection season, from April to present, have averaged the lowest in over 20 years. This, despite the Lower-48 gas storage inventory starting the 2019 storage injection season in April well below year-ago and five-year-average levels. How did we get here? Today, we begin a short series breaking down the supply-demand fundamentals that brought the gas market to its knees in recent months.

Records and extremes have been a running theme in the natural gas market this year. This past winter, we saw the highest price ever recorded in the U.S. gas spot market: $200/MMBtu at Sumas, WA. That was followed in the spring by the lowest prices ever recorded in the gas market: negative $8/MMBtu at the Waha Hub in West Texas (see Living in the Wild, Wild West for more on that). We’ve also continued to see record production and record demand, as well as exceptionally strong storage injections (discussed in Hot N Cold). Now, with less than a month of the official injection season left, there’s another “extreme” to mark down: some of the lowest natural gas futures prices seen in more than two decades. And not just for a day here and there, but on a monthly and even seasonal-average basis. Daily Henry Hub prompt futures settles from April through September this year averaged $2.41/MMBtu (yellow bar in Figure 1), the lowest seasonal average since the late 1990s, according to CME/NYMEX data from the Energy Information Administration (EIA).

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