Citi Predicts $6 Gas in U.S. 4Q; Could Spike to $100/MMBtu
While natural gas prices have always floated up and down, lately we’ve seen a rapid run-up in the NYMEX futures price that hit a seven-year high last week (see To the Moon! NYMEX, Spot NatGas Prices Jump $0.20 to Fresh Highs). Since then the price has come down a fair bit. There has been chatter that the NYMEX price might hit $10/MMBtu this winter if we have a particularly long and cold winter. An investment advisory note from Citigroup now says if we get a bitter cold snap, prices at the NYMEX may hit $100/MMBtu!
Continue reading
MDN editor Jim Willis has had several conversations this past week about the price of natural gas and how prices in the Marcellus/Utica are influenced by national and international events. “Is it possible,” one questioner asked, “to say that if the NYMEX price is X, then my local trading hub in the M-U will likely be X plus or minus Y?” Unfortunately, the answer is no. There is no one “price” of natural gas. The Henry Hub futures price (the NYMEX) is often quoted as “the” price, but in reality, there are hundreds/thousands of prices. Natgas is a commodity and traded at hundreds of points along major pipelines throughout the country. This post attempts to explain more about the complex landscape of what influences the price of natural gas where you are.
The NYMEX futures price for natural gas hit yet another 7-year high yesterday, closing up $0.20 to close at $5.46/MMBtu. The national spot price average (for physically traded/delivered gas) was up $0.18 to an average of $5.53/MMBtu. According to Bespoke Weather Services, the reason for ongoing run-up in prices is fear: “It is all fear in the market, owing to storage levels that are viewed as less than sufficient in the event of a cold winter, not just here in the U.S. but even more so over in Europe.”
Once again we’re talking about the price of natural gas–both the NYMEX futures price and the physical spot price. Yesterday the NYMEX hit a new post-pandemic high of $5.26/MMBtu. The NGI national average for spot prices (physical gas traded at hundreds of trading hubs across the country) rose to $5.35/MMBtu. The spot price in the Marcellus/Utica in both the northeastern and southwestern portions of the play also rose to new highs and is (gasp) coming close to the levels we saw during February and Winter Storm Uri. Again we ask the question: How long will prices stay this high (or even go higher)? We have some insight on that question below.
Lately, we’ve brought you a number of articles about the price of natural gas, both the financial NYMEX futures price (from the Henry Hub), and the spot price gas fetches at various trading hubs around the Marcellus/Utica region. The price of gas matters. It drives higher royalties for landowners, higher profits for drillers, and ultimately whether or not there is an increase (or decrease) in drilling new wells. Yesterday was another historic milestone. The NYMEX futures price for the “front month” (October) closed over $5 per MMBtu. That’s the first time the closing price for the current NYMEX contract has been over $5 in seven years (since 2014).
Just two days ago MDN told you about whispers that the NYMEX price of natural gas may actually hit or surpass $5/MMBtu (see 
The price of natural gas futures (the NYMEX) continues to hit new post-pandemic highs. The NYMEX price is high and remains high, as we pointed out on Friday, due to low storage numbers and Hurricane Ida shutting down Gulf of Mexico natgas production (see 
The price of natural gas has almost doubled over the past year. In September 2020 the NYMEX Henry Hub price stood at $2.41/MMBtu. Yesterday the price closed at $4.64/MMBtu. Astonishing! The question keeps coming: Why is the price of natgas high and staying high, even though production in the country’s largest shale gas basin–the Marcellus/Utica–is on the rise? It’s a paradox. The short answer is that (1) production in other basins has not bounced back like the M-U following the pandemic, and (2) there is more demand, in the form of exports, for American natgas (via pipeline and LNG). Increasing demand with the same or less supply equals higher prices.
On Monday MDN told you that given supplies of natural gas going offline on the Gulf of Mexico due to Hurricane Ida, and given that the hurricane missed major LNG export facilities (meaning they will continue to operate and export gas), the price of natural gas was/is skyrocketing (see 
According to the experts at RBN Energy, U.S. LNG feedgas demand “has been the single biggest factor behind the soaring natural gas prices and storage shortfall this year.” Feedgas is the gas that feeds LNG export facilities. Two more LNG facilities are due to begin operation in the first half of 2022, both of which have the potential to use Marcellus/Utica molecules. RBN does a deep dive into how LNG export facilities ramp up and when even more feedgas demand will increase.
Say a prayer for the folks in Louisiana. Hurricane Ida made landfall Sunday as a Category 4 storm near Port Fourchon, Louisiana. Gov. John Bel Edwards described it as “one of the strongest storms to make landfall here in modern times.” As the storm worked its way through the Gulf of Mexico, nearly all (95%) of the oil and natural gas platforms in the Gulf went offline and evacuated personnel in preparation. Given supplies going offline, and given the hurricane missed major LNG export facilities (meaning they will continue to operate), the price of natural gas skyrocketed, closing at $4.37 and (according to some analysts) on its way to a modern-era high of $4.50 or more.
In June MDN brought you the news that Enbridge’s Texas Eastern Transmission (TETCO) pipeline was being flow-restricted by the Pipeline and Hazardous Material Safety Administration (PHMSA). Some 40% of the Marcellus/Utica molecules that flow through TETCO’s pipeline to destinations in the southeastern U.S. disappeared and were predicted to stay that way until the end of September (see 
Henri, the huuuuge, “first hurricane to hit New England in 30 years” storm, turned out to be a relative nothingburger. Some 100,000 electric and gas customers lost service for a day or so. We don’t minimize the pain and trauma they experienced, but frankly, Henri was minimal compared to most hurricanes that strike land in the U.S. Already the spot price for natural gas in places like Boston and New York City (and elsewhere across the M-U) is soaring once again. It’s hot and humid in the northeast, and natural gas is needed to power air conditioners and electric power plants, driving up demand. That’s good for drillers and landowners.
In something of a strange twist, the Bloomberg News service is sounding the alarm that the world is headed for a shortage of natural gas. Bloomberg hates fossil fuels and anything to do with them. Yet they now sense an impending shortage of natural gas and it’s causing the Bloomies some existential angst. Bloomberg reports natgas prices in Europe have “surged more than 1,000%” since May 2020 with no end in sight. Earth to Bloomberg: Europe has no one to blame but themselves. They don’t want our “fracked gas.” Let them buy Putin’s pipelined gas at extortionist rates.
Once again the price of natural gas–both the financial futures price (the NYMEX) and even spot physical prices in many locations, like the M-U, increased dramatically. The NYMEX is back above $4/MMBtu once again. Just two months ago we longed for, prayed for, yearned for gas above $3! Why are natural gas prices moving higher and (for now) staying higher? In a nutshell, for three reasons: record exports, hot weather, and self-restrained drillers.