Latest Monthly STEO Predicts HH Spot Price to Avg $8.59 in 2H22
In its latest monthly Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) makes a startling prediction. EIA now says it expects the Henry Hub (HH) spot price to average $7.83/MMBtu in 2Q22 and then (gasp) it will average $8.59/MMBtu during the second half of 2022. Yesterday’s HH price jumped $.036 to close at $7.39. As we told you yesterday, we are on a very volatile roller coaster (see NYMEX Gas Price Drops $1.76/MMBtu in 2 Days to $7.03). Expect to see big swings both up and down–but mostly up. The latest STEO also predicts we will break the all-time high production record for natgas this year too.
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A historic runup in the NYMEX futures price for natural gas is turning into a historic drop in price. Over the past two trading days, last Friday and yesterday (Monday), the NYMEX price dropped $0.74 and $1.02 respectively for a total drop of $1.74. The reason for the drop appears to be an increase in production, up one full Bcf (billion cubic feet) last week from the prior week. The bears are on the prowl, looking to “maul” natgas futures. Strap in–it’s going to continue to be a bumpy ride on this roller coaster.
Wow! This is getting interesting…and scary. The NYMEX futures price of natural gas for the current “front month” contract soared another 37 cents yesterday to close at $8.78 per MMBtu. Another 14-year high. It certainly looks as though the price will soon blow by $9/MMBtu. One expert says “we feel we easily can go over $10 in prompt-month [pricing] over the next several weeks.” Yikes! What’s causing this massive spike?
Yesterday MDN told you we would likely see the front-month NYMEX natural gas contract settle above $8/MMBtu by the end of yesterday (see 
Natural gas traders’ nerves have gotten the better of them. Yesterday the NYMEX “front month” futures contract price for natural gas hit $8.14/MMBtu before falling back to close at $7.95. That is the highest price NYMEX gas has traded for in the past 14 years–since 2008. The main reason for this most recent spike up seems to be chatter about European countries imposing tighter sanctions on Russia, and the very real possibility Russia may retaliate by cutting off gas supplies to European countries beyond Poland and Bulgaria. A contributing factor is a temporary decrease in pipeline flows in both the Bakken and the Marcellus/Utica.
As a way of avoiding the pain of worldwide sanctions against his country over the invasion of Ukraine, murdering thug dictator Vladimir Putin has demanded that countries he sells natural gas to (namely in Europe) pay him in roubles. Most countries have refused his demand, so last week Putin began cutting off natgas shipments–so far to Poland and Bulgaria. However, more European countries are in Putin’s crosshairs to cut off supplies. If that happens, you can expect the price of natural gas worldwide to skyrocket, says an analyst with Rystad Energy.
An article in the Pittsburgh Post-Gazette highlights and focuses on the financial performance for four of the Marcellus/Utica’s largest publicly-traded companies, including EQT Corp., Antero Resources, Range Resources, and CNX Resources, during first quarter 2022. Even though the price natural gas is fetching is higher than it’s been in 14 years, M-U drillers are losing money. Why? Hedges and derivatives–bad bets on where the price of gas would go and locking in prices much lower than what the market currently supports.
When you only have one main pipeline flowing natural gas from the prolific Marcellus Shale to your region, as does Boston, if that pipe has an outage for any reason, as the Algonquin Gas Transmission (AGT) has had, you’re in trouble. AGT declared a force majeure (an unforeseen act of God) on the 26-inch line of its J System in Massachusetts. The outage in one particular section of the pipeline means “slashing nominations downstream of Trapelo to zero for the foreseeable future.” Ouch. Guess what’s happening to the price of natural gas at the Algonquin Citygates natgas trading hub? Through the roof.
New modern era records continue to be broken. The Henry Hub “front month” NYMEX futures price for natural gas briefly traded over $8/MMBtu yesterday before closing at $7.82/MMBtu (up $0.52 for the day). It certainly looks as if soon, possibly today, the NYMEX price will fly by and close at a price higher than $8/MMBtu. The rapid rise in price, now closing in on the highest in 14 years, is really quite breathtaking. However, some analysts are warning of a correction.
Yesterday the “front month” price of natural gas trading on the NYMEX Henry Hub closed at $7/MMBtu, the highest NYMEX price in 13.5 years (since Nov. 10, 2008). It was just two days we told you the NYMEX price was making a run for $7, closing at $6.64 on Monday (see 
Yesterday the NYMEX Henry Hub futures price (front month) contract rose $0.32 (5.3%) to close at $6.03/MMBtu. That’s the first time since January the price has broken $6. Why the bump in price now? Is it because of the war (everything is blamed on the Ukraine war these days)? Nope. At least, mostly not because of the war. As always, the factors that drive the price of natural gas here in the U.S. are complex. A number of things together are responsible, but mostly (as is usual) it is the weather driving the higher price.