EIA Predicts Henry Hub Price to Hit Average $3.71 in December 2023
Lately, we’ve been closely monitoring the price of natural gas, looking for indicators as to when the price will quit bumping around near $2/MMBtu and go higher once again. Two days ago, we told you experts are predicting we’ve now hit bottom, and the price of natgas will begin to rise (see Big NatGas Investor Says Commodity Price has Bottomed, Going Higher). Yesterday, the U.S. Energy Information Administration (EIA) outlined its case for why it believes the average price of the NYMEX Henry Hub will hit $3.71/MMBtu by December of this year.
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Yesterday the commodity price of the Henry Hub natural gas benchmark (the NYMEX front-month futures price) popped by 5%, rising 11 cents to close at $2.38/MMBtu. (Unfortunately, the price widget along the right side of the MDN website has not been updated. It still shows Friday’s closing numbers, even though it uses yesterday’s date.) We follow the price of gas regularly because (a) it affects how much in royalties landowners receive, and (b) it affects how profitable it is to drill, a good indicator of whether drilling will pick up or slow down. As we said yesterday, experts are predicting we’ve hit bottom, and the price of natgas will now begin to rise (see 
John Love, who used to manage the United States Natural Gas Fund (the country’s biggest natural gas ETF), said in an interview with CNBC last week he believes the commodity price of natural gas has already hit bottom and will rise from here. Love says drillers are focused on the future–and the future is LNG exports. Love’s sentiments about the price bottoming out were echoed by a second expert, Teucrium Trading CEO Sal Gilbertie.
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. Yesterday’s May edition predicts that U.S. natural gas production will rise to hit a new, all-time record high of 101.09 Bcf/d (billion cubic feet per day) this year! That’s up from last year’s record-high of 98.13 Bcf/d. However, the report also predicts domestic gas consumption will fall. What about prices? More supply with less demand typically means lower prices.
We are currently in the latest quarterly update season. In fact, we are about done with quarterly updates for the first quarter. Most (if not all) of the publicly traded Marcellus/Utica drillers have turned in their quarterly updates, as well as gas drillers from other plays (like the Haynesville). If you review the statements made by U.S. gas drillers in this latest round of updates, you’ll find the sentiment expressed that although we’re currently in the price basement for natural gas, most drillers don’t think it’s going last long. They think low prices for natgas are short-lived and that a rebound awaits us in 2024.
S&P Global Commodity Insights reports that natural gas production in the Marcellus/Utica has fallen this month, in April, by some 400 million cubic feet per day (MMcf/d) from the average production seen during the first quarter. The most notable declines are in eastern Ohio and southwestern Pennsylvania. Why is production down? Falling demand (from mild weather) and high rates of storage (extra supply) are crashing the spot price for natural gas traded at the region’s defacto benchmark trading hub–Eastern Gas South.
Lately, we keep reading predictions that the price of natural gas, while in the basement right now (low $2 range), will soon begin to go higher. And the price will stay higher. So say some experts (see our recent stories, 
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. Yesterday’s latest edition once again revises down the price EIA believes the Henry Hub will average for all of 2023. Last month’s STEO predicted an annual average of $3.02/MMBtu in 2023. This month’s STEO says the HH will average $2.94. Let’s add some color around that prediction.
Some interesting insights from S&P Global Commodity Insights into how the world has changed. S&P’s analysts say the Russia-Ukraine war is in the process of “resetting” the energy sector, with natural gas turning into a global and interconnected market affected by events and dynamics far beyond its traditional physical scope. In fact, S&P says natural gas is now similar, to some extent, to what oil used to be for decades. We will explain.
The NYMEX futures price for natural gas recently hit a 30-month low (see 
Three weeks ago, Chesapeake Energy announced a 15-year deal to provide natural gas for LNG exports to Gunvor Singapore Pte (see 
We have watched, with some distress, the crashing and burning of the price for natural gas in recent weeks and months (see 
Anderson King Energy Consultants, based in Dallas, Texas, advises clients in the oil and gas space on a variety of issues including acquisitions and divestitures, valuations of assets, and company strategy. AK provides its expertise to a number of companies, major companies with names you would recognize. Randy King and Jon Dormer, managing partners at AK, recently sent MDN a brief report that advises drillers to choke back their wells by 50% in order to boost the commodity price of natural gas to levels that are profitable once again.
We consider $2/MMBtu to be “the basement” when it comes to the price of natural gas trading at the nation’s benchmark Henry Hub in southern Louisiana. Yesterday we almost hit the bottom of the basement, with gas closing at $2.03. What happens if gas (gasp) closes below $2? Do we call that the sub-basement? Are we breaking through the barrier and right down into hell? Whatever you call it, prepare yourself. Why did gas tumble again yesterday to a new 30-month low? And will it go lower?
The past 18 months have been a wild ride for natural gas prices. We’ve gone from years of low prices to spiking near $10/MMBtu. In just the past few months, prices have dropped like a rock. The price dropped to a fresh 30-month low yesterday (see today’s lead story). The NYMEX price now threatens to dip below $2/MMBtu. Crazy! According to analysts speaking with Argus Media, we can expect continued wild gyrations in the price of natural gas “for the foreseeable future.” Some analysts say that volatility (sudden spikes up and down) in the price of natgas “could be here to stay.” As in permanently.
Once again, the NYMEX futures price, based on the physical Henry Hub price for natural gas, appears to be in a freefall. Yesterday, the NYMEX’s front month contract price (for April) lost 18 cents per million British thermal units (MMBtu), or 8%, dropping to $2.17/MMBtu. It sure feels like the bad old days when we couldn’t keep the price above $3/MMBtu. This is the second-lowest price this year so far. Yesterday’s price was 77% lower than the 52-week high of $9.68 hit Monday, Aug. 22, 2022. Why so low? Warm weather and high production.