Henry Hub Looking Bearish Through Winter

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--U.S. natural gas prices on Tuesday were suppressed amid ample storage and mild weather in the Lower 48 states, and various forecasts suggest bearish trends could continue into early next year.

Henry Hub, the U.S. benchmark for the price of natural gas, was trading down by around 1% in pre-market trading on Tuesday to move in the range of $2.90 per million British thermal units (MMBtu). Prices started the year on a high note, hitting $5/MMBtu in early January, but warmer winter weather trends and a mild autumn have weighed heavily on Henry Hub, which traded as low as $1.40/MMBtu this year.

Natural gas prices tend to swing on the weather, which influences demand, and availability. When Russia, once a major gas supplier to Europe, was sanctioned heavily for its invasion of Ukraine in 2022, Henry Hub traded in the $9 range, though markets have long since adjusted.

On the supply side, a report from the U.S. Department of Energy covering the seven-day period ending October 11 found working storage levels for natural gas were 5% above the five-year average for this time of year and 3% above year-ago levels, even though demand increased by a similar level during the reporting period.

Production trends, meanwhile, remain relatively static, but with an expected average of 113 billion cubic feet per day, the United States is among the largest natural gas producers in the world.

"Steady supplies from the U.S. shale patch are keeping storage inventories above the 5-year average, limiting prices from increasing this year," said Maria Sanchez, a senior gas products analyst at IIR Energy.

Sanchez added that any chance for a mild winter should keep prices suppressed into early 2025. And while the first day of autumn in the Northern Hemisphere was a month ago, the thermometer says otherwise, as Minneapolis, Minnesota, usually one of the nation's colder spots, expected temperatures in the mid 70 degrees Fahrenheit on Tuesday, a good 20 degrees warmer than normal.

A forecast through February from the National Oceanic and Atmospheric Administration (NOAA) finds a slowly-developing La Nina system is expected to create wetter-than-average conditions for the Pacific Northwest and Great Lakes region, with drought likely in the south. Only the Northern Plains and the Pacific Northwest are expecting a colder-than-normal winter this season.

Barring unforeseen winter temperature anomalies, the government expects winter heating fuel demand and costs to be about the same as last year. That is unless you live in the Midwest, where a return to a normal winter should outweigh the impact of market prices and leave consumers with somewhat higher bills this year.

The government nevertheless is expecting a rebound in natural gas prices. The Energy Department is expecting Henry Hub to average $2.28/MMBtu this year and climb to $3.06/MMBtu by next year. During the 2010s, Henry Hub averaged $3.30/MMBtu. Prices are expected to increase as steady supplies come up against an increase in exports of liquefied natural gas.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).