Prompt CME/NYMEX Henry Hub natural gas futures prices averaged $4.54/MMBtu this winter, up 67% from $2.73/MMBtu in the winter of 2020-21 and the highest since the winter of 2009-10. Prices have barreled even higher in recent days, despite the onset of the lower-demand shoulder season, with the May contract hitting $6.643/MMBtu on Monday, the highest since November 2008 and up more than $1 from where the April futures contract expired a couple of weeks ago. Europe’s push to reduce reliance on Russian natural gas has turned the spotlight on U.S. LNG exports and their role in driving up domestic natural gas prices. However, a closer look at the Lower 48 supply-demand balance this winter vs. last suggests that near-record domestic demand, along with tepid production growth, also played a significant role in drawing down the storage inventory and tightening the balance. Today’s RBN blog breaks down the gas supply-demand factors that shaped the withdrawal season and contributed to the current price environment.
NATGAS Permian is a weekly natural gas fundamentals analysis focusing entirely on the key market drivers within the Permian basin. The report contains details and forecasts around natural gas production, demand, pricing, and a summary of pipeline outflows and capacities from the Permian to neighboring regions.
When we looked at the gas market balance last September in High Voltage, we noted that the $5-plus prices at the time were potentially just the tip of the iceberg, and that given the precarious storage situation — the deficit had expanded to about 600 Bcf, from a 500 Bcf surplus a year earlier — and lethargic production, the market was primed for bullish price action during the winter of 2021-22. Now with winter in the rearview mirror, we can say that the worst-case scenario of another deep freeze like 2021’s Winter Storm Uri didn’t transpire. Nevertheless, demand growth outpaced supply, leading to overall tighter balances. And the year-on-year storage deficit that first emerged during Uri persisted through the winter, leaving storage with the lowest winter carryout in three years and shoulder-season prices above $6/MMBtu. How did we get here? Well, in some respects, the current market was more than a year in the making. Next, we dive into gas supply-demand data to understand the primary drivers and what they mean for the injection season ahead.
A good way to assess what’s driving the tightness (or looseness) of the gas market is to compare current fundamentals with the previous year. We do that by using the historical supply-demand data behind our daily RBN NATGAS Billboard report. Figure 1 shows the average winter-on-winter changes for each of the supply-and-demand components, comparing November 2021 through March 2022 to the same period the previous winter. The navy-blue bars indicate a winter-on-winter increase, while the red bars indicate a decline.
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About the song
“Runaway Train” was written by Dave Pirner and appears as the third song on Soul Asylum’s sixth studio album, Grave Dancers Union. The poignant video for the song featured images of missing teenagers, shining the light on the teen runaway problem. Released as a single in June 1993, the song went to #5 on the Billboard Hot 100 Singles chart and has been certified Gold by the Recording Industry Association of America (RIAA). It won a Grammy Award for Best Rock Song in 1994. Personnel on the record were: Dave Pirner (lead vocals, rhythm guitar), Dan Murphy (lead guitar, backing vocals), Karl Mueller (bass), Grant Young (drums) and Sterling Campbell (percussion, drums).
Grave Dancers Union was recorded between February and May 1992 at The Power Station and River Sound in New York City, Pachyderm Discs in Cannon Falls, MN, and Cherokee Studios in Hollywood, with Michael Beinhorn producing. Released in October 1992, the album went to #11 on the Billboard Top 200 Albums chart and has been certified 2x Platinum by the RIAA. Three singles were released from the LP.
Soul Asylum is an American rock band formed in Minneapolis in 1981 by Dave Pirner, Dan Murphy, Karl Mueller, and Pat Morley. Originally called Loud Fast Rules, they changed their name to Soul Asylum in 1983. They have released 12 studio albums, two live albums, five compilation albums, two Eps, and 22 singles. Seventeen members have passed through the band since its formation, with Dave Pirner being the only original member still in the band. Bassist and founding member Karl Mueller passed away from cancer in 2005. The band continues to record and tour and will begin a series of live dates starting in May.
