Averaging $2.18 per million British thermal units (MMBtu) in March, natural gas spot prices at the Henry Hub were at their lowest level since 1999. In the past few weeks, spot prices have traded below $2.00 per MMBtu, and NYMEX futures prices have been slightly above the spot prices. This month’s STEO reduces the average price outlook for 2012 to $2.51 per MMBtu, a downward revision from the 2012 average price outlook of $3.17 per MMBtu expected in last month’s STEO. Henry Hub prices have been on an overall downward trend since summer 2011, and March 2012 prices (as reported by Natural Gas Intelligence) declined on 16 of 22 trading days to end the month at $2.00 per MMBtu.
The average 2012 Henry Hub price represents a decline of $1.49 per MMBtu from the average 2011 price; similar declines also are expected for residential, commercial, and industrial prices, as well as for the price of natural gas delivered to electric power plants. Prices have fallen so far this year as a result of increased production and abundant supplies, coupled with reduced winter demand for natural gas due to warm weather, leading to record storage levels by the season’s end.
(For the Week Ending Wednesday, April 11, 2012)
- With continued mild April temperatures and the fourth week of net storage injections in 2012, natural gas prices dropped again this week. The Henry Hub price closed at $1.91 per MMBtu on April 11, down 15 cents for the week.
- At the New York Mercantile Exchange (NYMEX), the May 2012 natural gas contract fell 15.7 cents per MMBtu for the week to close at $1.984 per MMBtu on April 11.
- Working natural gas in storage rose slightly last week to 2,487 billion cubic feet (Bcf) as of Friday, April 6, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). An implied storage build of 8 Bcf for the week positioned storage volumes 888 Bcf above year-ago levels.
- The natural gas rotary rig count, as reported by Baker Hughes Incorporated a day early on April 5 due to the Good Friday holiday, decreased by 11 to 647 active units. Meanwhile, oil-directed rigs increased by 11 to 1,329 units, resuming the divergence between the two drilling objectives.
Movement in the Henry Hub day-ahead price reflected a widespread decrease in market prices in this week’s cash market by falling 7.3 percent, from $2.06 per MMBtu the previous Wednesday to $1.91 per MMBtu yesterday. As the Spot Prices tab on the left shows, the Henry Hub cash price began its descent last Thursday at $1.98 per MMBtu and hit its low yesterday. In the same period, numerous other spot market pricing points also began dropping below the $2.00 mark.