After the hottest summer on record, market watchers are keeping a close eye on natural gas supplies as demand reignites with the winter heating season.
Ironically, the state of gas storage is especially questionable in energy-rich Texas and elsewhere in the south as weeks of consecutive days of triple-digit temperatures had air conditioners working overtime. The abnormal demand for gas-driven electrical power came during the typical build-up of winter stockpiles.
“Throughout the summer, power generation really surprised to the upside,” said Leticia Gonzales, North America price and markets editor for Natural Gas Intelligence, Houston. “We set records starting in the spring and that continued even through September. In the south-central region, inventory builds during the seasonal (gas) injection period were lower due to the extreme heat.”
Gonzales joined Emily Merchant, senior production manager for market data at power market software company Yes Energy LLC, Boulder, Colo., in examining what could lie ahead for the volatile U.S. gas market. Despite increased summertime demand, U.S. Henry Hub spot prices settled at $2.64 per million BTU in September, according to the U.S. Energy Information Administration (EIA), far below the average $6.45/MMBtu for most of 2022. The EIA reported just over 3.4 Bcf of gas in storage in the U.S. as of Oct. 5, up 5.3% from the five-year average.
“Henry Hub pricing is not expected to fluctuate too much over the next several months, depending on how the weather plays out, but are expected to average in the $3 to $4 range throughout all of next year,” Gonzales said.
The higher prices last year were largely attributed to increased exports of liquefied natural gas (LNG), mainly from a growing network of Gulf Coast terminals, which are currently sending more than 14 Bcfd abroad.
“In addition to the supply and demand fluctuations in the U.S., we are becoming more and more intertwined with the global gas market,” said Gonzales. “So, when you have major events happening across the pond it will influence Henry Hub prices here and then it’s just a ripple effect down the market as well.”
Overall, Merchant said the data suggests U.S. gas supplies will be sufficient to meet winter demand with prices staying below the 2022 highs, but any forecast will go out the window if the winter follows a trend like that seen this past summer.
“Mother Nature is always the biggest wild card,” she said. “We can look at as many forecasts as possible, but Mother Nature often has different plans in store for us.”