U.S. EIA Predicts Henry Hub to Average $3.79 in ’22, $3.63 in ’23
According to the U.S. Energy Information Administration (EIA), natural gas spot prices at Henry Hub averaged $3.91/MMBtu for 2021. Each month the EIA issues a Short-Term Energy Outlook (STEO). In the latest STEO update for January, EIA predicts that the annual average HH price will average $3.79/MMBtu in 2022, down $0.12 from 2021. EIA further predicts the HH price in 2023 will go down yet more, to an average of $3.63.
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It happens every winter, but the frequency and severity are increasing. We’re talking about the spot price of natural gas sold in large, northeastern cities, which experience price spikes during cold snaps. The reason for the spike is there is not enough gas to go around when it gets really cold, and there’s not enough gas because the northeast has blocked new pipelines that would provide enough. With the current cold snap, prices are spiking right now, once again. The spot price for natural gas being delivered at the Iroquois Zone 2 hub near New York City is $28.55/MMBtu. At the Dracut, Massachusetts hub (north of Boston), the price has hit $30/MMBtu. And the price at the Algonquin Citygate (Boston proper), is $20-$22/MMBtu.
“Anti” in MDN’s parlance means “anti-fossil fuel.” Being anti-fossil fuel is a wholly insane philosophical position to take, yet many in the Democrat Party have taken that position. (Yes, we’re calling some Democrats insane.) People like Sen. Elizabeth “Pocahontas” Warren, Sen. Ed “Lackey” Markey, and Sen. “Crazy” Bernie Sanders, and others in Congress, bash away and demand the end of fossil fuels. Yet those same antis who demand an end to fossil energy have just sent a letter to the Federal Energy Regulatory Commission (FERC) demanding FERC do something to lower the price of oil, natural gas, and electricity in their blue states. Why? Because they don’t want to be voted out of office for their obviously failed policies.
Baby, it’s cold outside! At least here in the northeastern U.S. Cold temps in the northeast are causing an increase in the use of natural gas for both heating and electricity production. That increase in demand is (you guessed it) causing an increase in prices, and the increase in prices is causing some natural gas flows to reverse course and head north instead of south out of the Marcellus/Utica.
S&P Global Platts and its analytics division is a powerhouse provider of information, analysis, and benchmark prices for the commodities and energy markets. We often bring you their insights. Yesterday Platts Analytics released their 2022 energy outlook. Next year, Platts Analytics expects supply will catch up and exceed demand. Let that sink in. In 2022 we will see an increase in LNG exports, a rebound in U.S. shale oil, shale gas, and shale NGLs production–and the return of investment in non-OPEC production. You can guess what all that means for prices…
Underinvestment in oil and gas development extended into a second year in 2021 even as global energy demand rebounded, raising the prospect of price shocks, scarcity, and growing energy poverty, according to a new report by the International Energy Forum (IEF) and IHS Markit. Oil and gas investment will need to return to pre-COVID levels and stay there through 2030 to restore market balance, the report states. If more investment doesn’t happen quickly, the world will experience more price gyrations and it will lead to “adverse economic consequences,” such as wider energy poverty, more frequent scarcity, and fuel switching to more polluting energy sources such as wood and coal.
The NYMEX natural gas futures price plunged more than 10% on Monday, falling to the lowest level since August to close down 47.5 cents at $3.66 per MMBtu. And that comes after last week’s 24% loss, which was natural gas’ worst week since February 2014! What’s going on? The forecast is for warmer-than-expected winter temperatures across much of the country.
The NYMEX “front month” futures contract for natural gas traded on the Henry Hub benchmark has crashed over the past three days, down more than 90 cents, closing at $4.26/MMBtu yesterday. Why? Because weather models predict relatively warm weather in the weeks ahead. Weather trumps all other factors in the price of natural gas. Which exposes the intentional lie (or stupidity, take your pick) of people like U.S. Senator Elizabeth Warren who are spreading the false narrative that LNG exports are the cause of high natural gas prices here at home (see 
Earlier this week MDN told you about a nastygram written by U.S. Senator Elizabeth “Pocahontas” Warren (see 
According to the experts at RBN Energy, “If there was ever a year that proves NGLs march to the beat of a different drummer, 2021 was it.” Production of NGLs went *up* during the pandemic, not down. Prices have been up, down, and all around. Like all oil and gas markets (markets of any kind, really), there is no one, specific factor or reason why NGL production and prices are doing what they are doing. It is a complex soup of factors that affect the NGL market–a market that’s increasingly vital for Marcellus/Utica producers.
According to S&P Global Platts, gas production from the Marcellus and Utica shales, since the beginning of November, has “surged,” rising by nearly 1 Bcf/d (billion cubic feet per day), or up about 2.7%. The surge means production is now near record highs–in the upper 34 Bcf/d range. However, the M-U is constrained by pipeline takeaway and finite local markets. With rising supply and steady demand, prices are doing what Econ 101 predicts: beginning to fall.
The current futures contract for NYMEX natural gas priced at the Henry Hub trading location, called the “front month” (of December), was down for the third trading day in a row yesterday. The December contract fell 45 cents (8.26%) to $4.98 per MMBtu–the first time it has slipped under $5 since October 21. Where might the price be heading next?