US natural gas prices this winter have been at their lowest levels in decades. On Monday, 10 February, the near-month natural gas futures price at the New York Mercantile Exchange (NYMEX) closed at US$1.77/million Btu. This price was the lowest February closing price for the near-month contract since at least 2001, in real terms, and the lowest near-month futures price in any month since 8 March, 2016, according to Bloomberg and FRED data.
In addition, according to Natural Gas Intelligence data, the daily spot price at the Henry Hub national benchmark was US$1.81/million Btu on 10 February 2020, the lowest price in real terms since 9 March 2016. Henry Hub spot prices have ranged between US$1.81/million Btu and US$2.84/million Btu this winter heating season (since 1 November 2019), generally because relatively warm winter weather has reduced demand for natural gas for heating. Natural gas production growth has outpaced demand growth, reducing the need to withdraw natural gas from underground storage.
Dry natural gas production in January 2020 averaged about 95 billion ft3/d, according to IHS Markit data. IHS Markit also estimates that in January 2020 the US saw the third-highest monthly natural gas production on record, down slightly from the previous two months.
IHS Markit estimates that US natural gas consumption by residential, commercial, industrial, and electric power sectors averaged 96 billion ft3/d for January, which was about 4.4 billion ft3/d less than the average for January 2019, largely because of decreases in residential and commercial consumption as a result of warmer temperatures.
However, IHS Markit estimates that overall consumption of natural gas (including feed gas to LNG export facilities, pipeline fuel losses, and net exports by pipeline to Mexico) averaged about 117.5 billion ft3/d in January 2020, an increase of about 0.2 billion ft3/d from last year. This overall increase is largely a result of an almost doubling of LNG feed gas to about 8.5 billion ft3/d.
Because supply growth has outpaced demand growth, less natural gas has been withdrawn from storage withdrawals this winter. Despite starting the 2019 – 20 heating season with the third-lowest level of natural gas inventory since 2009, by 17 January 2020, working natural gas inventories reached relatively high levels for mid-winter. The US Energy Information Administration’s (EIA) data on natural gas inventories for the Lower 48 states as of 7 February 2020, reflect a 215 billion ft3 surplus to the five-year average. In EIA’s latest short-term forecast, more natural gas remains in storage levels than the previous five-year average through the remainder of the winter.
According to the National Oceanic and Atmospheric Administration (NOAA), January 2020 was the fifth-warmest in its 126-year climate record. Heating degree days (HDDs), a temperature-based metric for heating demand, have been relatively low this winter, which is consistent with a warmer winter. During some weeks in late December and early January, the US saw 25% to 30% fewer HDDs than the 30-year average. This winter, through 8 February, residential natural gas customers in the US have seen 11% fewer HDDs than the 30-year average.
Principal contributors: David Manowitz, Christopher Peterson
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