“Micro” Henry Hub Futures & Options Grabs 50K Contracts in 3 Days
CME Group, which operates the Chicago Mercantile Exchange and New York Mercantile Exchange (NYMEX), announced in September that it would launch Micro Henry Hub futures and options beginning November 6 (see CME Group Launching “Micro” Henry Hub Futures & Options Nov. 6). The launch happened, and in under three days, Micro Henry Hub futures surpassed 50,000 contracts. A huge success!
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Once a month, U.S. Energy Information Administration (EIA) analysts issue the agency’s Short-Term Energy Outlook (STEO), their best guess about where energy prices and production will go in the next 12 months. Last month, the report predicted new all-time highs for natural gas production in 2023 (see 
Just when we were beginning to feel comfortable that maybe, just maybe, the price of natural gas would stay higher for longer instead of lower for longer, yesterday happened. Did you notice? The price for the “front month contract” of the NYMEX Henry Hub got whacked, falling a full 25 cents in a single day, closing at $3.26/MMBtu. It was the biggest one-day plunge in price since March of this year. What happened? As is typical, it’s because of the weather.
Have you noticed the nice rise in the price of gas? Yesterday, the NYMEX Henry Hub price rose $0.22 to close at $3.58/MMBtu (up 6.24% in a single day). Cool! Better yet, the spot price of natural gas in the Marcellus/Utica region is on the march, too. According to Argus Media, spot natural gas prices across the northeastern U.S. surged to the highest levels in months. Why? Weather. Specifically, cold weather. Example: The Columbia Gas Appalachia index, a “key indicator” for the price of gas from the Marcellus shale in Pennsylvania and surrounding states, more than doubled to $2.37/mmBtu on Monday, the highest since March 2nd. How high will it go?
The Baker Hughes rig count has crashed this year compared to last year’s numbers. A few months ago, we began to chronicle the weekly rig count to keep track of this alarming situation (which we post about every Monday). U.S. Energy Information Administration (EIA) analysts have taken notice of the crashing rig count and asked themselves: Why? It may seem obvious, but EIA points out in a new post on its Today in Energy website that the crash in the natural gas rig count directly correlates to the crash in the price of natural gas.
Once a month, U.S. Energy Information Administration (EIA) analysts issue the agency’s Short-Term Energy Outlook (STEO), their best guess about where energy prices and production will go in the next 12 months. Last month, the report predicted new all-time highs for natural gas production in 2023 (see 
In September, production from the Marcellus and Utica shales averaged just under 35.1 Bcf/d — down from a nearly two-year high at 35.3 Bcf/d in August, according to data from S&P Global Commodity Insights. Over the past three years, producers in the Marcellus/Utica have dialed back output in September. Why? Cooling temperatures that lead to falling gas demand which further leads to a crash in gas prices. How bad is the gas price crash? The Eastern Gas South trading hub near Pittsburgh, considered the benchmark for the M-U, saw cash prices trading around $0.80/MMBtu yesterday. Yes, 80 cents! The October gas contract at Eastern Gas South recently settled as low as $0.99/MMBtu. Ouch.
According to an analysis by S&P Global Commodity Insights, large U.S. shale gas drillers (namely Marcellus/Utica drillers) have hedged (pre-sold at a specific price) an average of 50% of anticipated shale gas production for the second half of 2023. The average price of the hedges is $3.35/Mcf, far above the average NYMEX Henry Hub price that has been bumping along between $2.25 and $2.75. CNX Resources is the top hedger, hedging 80% of its production in 2H23 at $3.04/Mcf.
According to the International Gas Union’s (IGU) 2023 Global Wholesale Gas Price Survey report (full copy below), 2022 was THE most turbulent year in the history of gas markets, as the global energy crisis intensified and the global price levels reached record highs. Last year saw record price levels, with Europe’s wholesale prices reaching over $30 per MMBtu. The average world price for natural gas reached $9.44 per MMBtu in 2022 — the highest ever — compared to a record low of $3.23 per MMBtu in 2020. Record high prices last year were seen in all regions apart from North America and the Former Soviet Union.
According to analysts writing for S&P Global Commodity Insights, the long-range forecast from the U.S. National Weather Service calls for milder temperatures in the U.S. Mid-Atlantic region this winter. Warm temps equal less natural gas usage. Williams’ Transco Regional Energy Access Expansion (REAE) project will partially come online in October, flowing an initial 450 MMcf/d (out of 829 MMcf/d) of Marcellus gas to PA, NJ, and Maryland. More supply with less demand is a classic economic prescription for lower prices in New York, New Jersey, and the Mid-Atlantic region. So says the S&P analysts.
Yesterday MDN editor Jim Willis had a nice chat with a renewing MDN subscriber (a landowner with wells and leases in Ohio). The question arose, “What do you see happening right now?” Jim’s response: “As long as the price of natural gas stays below $3, not much!” Jim made the point that price drives this industry, and ongoing prices in the basement aren’t helping. Can we get an amen? Both Jim and the subscriber agreed that gas prices may be heading higher soon. That conversation seems to have been prescient. Yesterday the front-month Henry Hub NYMEX futures price rocketed to a six-week high, close to $3 (closing at $2.96/Mcf). Are we finally going to go above, and stay above, $3 gas?