EIA Predicts Natural Gas Prices in 2018 & 2019 Will be “Flat”
The price of natural gas is a complicated subject. First, “the price” is never just “the price.” Many people look to the NYMEX or Henry Hub spot price as “the price.” Indeed, most of the financial contracts for natural gas are based on the Henry Hub price. However, as we’ve written many times over the years, gas is bought and sold at hundreds of points along major interstate natural gas pipelines. The price at one place on a pipeline, like the Tennessee Gas Pipeline Zone 4 in northeastern Pennsylvania, is vastly different from the Henry Hub. Price is dependent on many factors–supply and demand to be sure. But also weather. Weather is probably the biggest influencer of natgas prices. Why? The warmer (or colder) it is, the more natural gas is used to cool or heat homes and businesses. The more demand, the higher the price. Conversely, the less demand, the lower the price. Henry Hub is a useful yardstick and the most-watched natural gas price in the world. Our favorite government agency, the U.S. Energy Information Administration, recently published their Short-Term Energy Outlook (STEO). In the STEO, EIA predicts the price of natural gas at Henry Hub will remain relatively flat both this year and next year. This year (2018), EIA says the average price of gas at Henry Hub will be $2.88 per thousand cubic feet (Mcf). Next year? EIA says the price will average $2.92/Mcf. The average price of gas at Henry Hub for all of 2017 was $2.99/Mcf. Bottom line: The price of gas is a bit depressing for gas drillers for the foreseeable future. Here’s EIA’s reasoning…
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Anyone with even a passing interest in the natural gas market–either the Marcellus/Utica or elsewhere–knows there is one dominant factor that drives exploration and production: PRICE. The price of natural gas is the tail that wags the entire natgas dog. Low price? Less (or no) drilling, shut-in wells, less leasing–everything is less. High price? Pop the cork on the champagne bottle! When the price goes up and stays up, drillers begin seismic surveys, then leasing, then permits, then drilling. After drilling comes pipelines–both to the well and to market. And businesses tend to gather around points where there is access to natgas (and its byproducts). It’s a virtuous cycle, from upstream (drilling) to midstream (pipelines) to downstream (end users of the gas)–that all starts with price. Who should have an interest in price? Everybody! However, there are some whose jobs and livelihoods depend on price–gas traders, industrial buyers, drillers who need to sell their gas, etc. Those people need a daily update on the price. Who do they turn to? There are several price reporting authorities that monitor trade information for natural gas trading. There is no single price for natural gas–there are hundreds of prices. Gas is traded at trading hubs or points along major pipelines across the country. Each time a trade is done (price requested, price offered or “ask” and “bid”), that valuable information gets recorded and sent to a price recording authority. Each day around 1:30 PM Central Time, NGI gathers up trade information for THAT DAY, trades that have occurred so far at trading points all over the US and Canada, and posts/emails the information to subscribers. It is like getting tomorrow’s prices–the prices everyone else will base their trades on–today! How can you get tomorrow’s prices today? Glad you asked. 
In the fourth quarter of 2017 (Oct-Dec), 2.3 billion cubic feet per day (Bcf/d) of new/extra pipeline capacity was added in the Marcellus/Utica region, to carry our gas to markets outside the region. Even though production in the Marcellus/Utica has continued to climb every single month, that 2.3 Bcf/d of extra “takeaway” capacity had an immediate effect–prices for our gas began to rise. Here’s a bit of exciting news: By the end of the first quarter this year (that is, by Mar. 31st), another 3 Bcf/d of pipeline takeaway capacity will be online. We expect this new takeaway, combined with last quarter’s increase in takeaway, will continue to drive prices for our gas higher…
In the end, even the ultra-liberal editors of the Boston Globe couldn’t ignore and deny reality–the reality that their own favorite sons and daughters are to blame for sky high energy prices and dirtier air, because they’ve fought against new natural gas pipelines. We’ve been blowing the horn that New England is getting hosed on energy prices, paying the highest average prices in the world for natural gas, because of their stubborn refusal to allow new Marcellus gas pipelines into the region (see 
As we pointed out earlier this week, New England now has the dubious distinction of paying the highest prices for natural gas–in the world (see 
Baby it’s cold outside! This was predictable (and indeed, MDN did predict it). With the arrival of an extended cold period, because of a lack of natural gas pipeline capacity in New England, recent spot prices for natgas near Boston have spiked to more than $35 per thousand cubic feet (Mcf). It gives New England the dubious distinction of paying the highest average price for natural gas in the entire WORLD. The price for the same gas about 250 miles away in the Marcellus? Between $1-$2/Mcf. And yet the dunderheads in New England, like U.S. Sen. Elizabeth “Pocahontas” Warren, continue to block new pipelines in the region. “Stupid is as stupid does,” as Forrest Gump said. We hope our friends in New England enjoy paying through the nose and every other orifice they possess over the next few weeks, until the arctic blast subsides…
American shale has fundamentally transformed the world geopolitically. How? Just think about. #1 – Saudi Arabia and Iran are on the brink of all-out war. For decades Saudia Arabia has been the world’s leading oil producing country. Iran has been in the top five oil producing counties. #2 – Venezuela, the country with the world’s largest oil reserves, is rumored to have defaulted on its foreign debt. Either situation, #1 or #2, hint at the potential for the flow of oil to be disrupted. Both happening at the same time is an oil cataclysm. A decade ago such news would have resulted in oil hitting $100, perhaps even $150 per barrel. The price of gas at the pump would have soared, overnight, to more than $5/gallon. Yet what has happened to the price of oil with this recent geopolitical news? Nothing. If anything, the price has gone down! The only reason oil prices are not through the roof is because of the abundance of American shale oil. An occasional guest blogger here on MDN is Daniel Markind, a partner with law firm 
Last week the Federal Energy Regulatory Commission’s (FERC) Office of Enforcement (OE) released their 2017-18 Winter Energy Market Assessment, an annual look ahead to the coming winter. OE shares their thoughts and expectations about market preparedness, including an assessment of risks. What does the report show? OE says production is going up (increasing another 5 billion cubic feet per day by next April), natural gas in storage is “robust” (meaning high), and the upcoming winter weather looks to be warmer than normal in most of the country, including the northeast. Translation: Don’t expect the price of natural gas to spike this winter. Prices will remain relatively low. Here’s the full OE report (interesting reading, pretty charts)…
With new pipelines coming online in the Marcellus/Utica, will the price of natural gas bought and sold at regional trading points, like Dominion South and TGP (Tennessee Gas Pipeline) Zone 4 go higher? It certainly makes sense that with more of our gas flowing out of the area, there will be less gas left in the area and therefore will fetch a higher price. In fact, just after Energy Transfer’s Rover Pipeline, now in partial service, began to flow, the price of gas at the Dominion South hub jumped 31% (see 
Once upon a time the Environmental Defense Fund (EDF) held out the veneer of practical environmentalism–people who would at least listen to the fossil fuel industry and in some rare cases, reach their hand across the isle to work on initiatives with the industry (for example, they are a partner in the Pittsburgh-based Center for Responsible Shale Development). But over the past few years that veneer has been stripped off, and now the EDF has been exposed as a hack organization, just like all the rest of the loons on the left. Case in point is their latest propaganda, issued last week. The EDF published a “report” that makes the rather preposterous claim that New England customers have overpaid utility bills by $3.6 billion due to collusion between the natural gas and electricity industries. EDF spins the outlandish theory that Avangrid and Eversource brilliantly conspired to create Enron-style fake gas shortages involving a whopping 3.5% of the capacity of the Algonquin pipeline–all in order to drive up electric clearing prices for a wind farm Avangrid didn’t yet own, a rarely dispatched Avangrid oil peaker run under rate of return, and three crappy, rarely operated oil and coal plants in New Hampshire–plus nine little hydro dams that Eversource was trying to unload for years (finally sold last week). EDF’s tall tale is so bizarre (and hard to follow) it’s laughable. However, mainstream fake news media picks it up and regurgitates it to an unsuspecting public, so we’re here to set the record straight on yet another Big Green hoax…
Each year the consultants at Deloitte conduct a survey of oil and gas industry professionals. Last year the survey showed o&g execs believed we were already in the midst of a recovery for the industry (see 
According to experts speaking at the Platts Houston Energy Forum held yesterday, new pipelines going into service in the Marcellus/Utica region are having an effect. Pipeline constraints–not enough capacity to get the gas to markets outside of the region–are easing. Prices in some areas of our region where gas is bought and sold are improving (going up), but prices still have a long way to go. Perhaps the biggest eyeopener is that at least in the near-term, we may end up having more pipeline capacity than gas to fill it. By next spring, another 4.57 billion cubic feet per day (Bcf/d) of new pipeline capacity will go online: Access South and Adair Southwest projects on Texas Eastern Transmission will add another 520 million cubic feet per day (MMcf/d); Leach XPress on Columbia Gas Pipeline will add 1.5 Bcf/d; Rover Pipeline will get finished, bringing online an additional 2.55 Bcf/d (on top of the existing 700 MMcf/d flowing now). Here’s what the experts had to say about what’s coming down the pike in our region over the next year or so…
The greater the risk, the greater the reward. You’ve heard that bromide multiple times in your life. And for good reason–it’s true. Our entire stock and financial markets are based on that truism. Gas traders, those who trade futures contracts for natural gas, are like any other traders–they big price swings. It is when the price of the underlying commodity swings that (i.e. when risk rises) that traders make the most money. Don’t know if you’ve noticed, but the price of natural gas hasn’t really swung much at all over the past few years–at least at the Henry Hub, which is where most contracts are pegged. Why? We have a “glut” of natural gas. As soon as the price creeps up a bit, more gas floods the market. But as we’ve written many times in the past, there isn’t just “one price” when it comes to natural gas. There are hundreds of prices–gas is traded at hundreds of different trading points along major pipelines across North America. While the price of gas is steady and doesn’t change much (i.e. no real opportunity to profit from risk) at Henry Hub, such is not the case at all trading hubs. Particularly in the Marcellus/Utica. In our region, prices have been much lower than the Henry Hub–and much more volatile. Wider swings up and down. Now that Rover is flowing, prices are going up in some areas of our region. Other pipelines have a similar effect. So gas traders are beginning to leave contracts pegged to Henry Hub behind and trying their hand at contracts pegged at other trading hubs–some in our region, some in other regions. Bloomberg gives us the low down on a trend that has the power to affect the price of natural gas across the country–particularly in our region…
Every now and again it’s helpful to step back and look at the big picture, in particular with respect to major pipeline projects. These projects have a deep and profound effect on drilling. In fact, the addition of just three pipelines in our region (currently under construction) will fundamentally change the price of gas in the Marcellus/Utica region–and ultimately lead to more drilling. How so? As part of an article on the Seeking Alpha investor’s website, author and investor Callum Turcan wrote about “Why Appalachia Matters” in which he details that three pipeline projects already getting built will provide an extra 6.45 billion cubic feet per day (Bcf/d) of capacity to flow our natural gas out of this region to other regions. Some of that capacity is already happening, with a partial startup of Rover Pipeline. When Rover is completed in early 2018, it will flow 3.25 Bcf/d of natural gas out of our region. Massive! In addition, Atlantic Sunrise is now under construction and when it is completed by the middle of 2018, it will flow 1.7 Bcf/d of gas out of the area. Finally, Leach XPress is due to be done by the end of THIS YEAR, and when it is, it will flow an extra 1.5 Bcf/d of gas out of the area. What will be the response? It’s pretty easy to predict that (a) prices for our gas will go up, and when prices go up, (b) drillers will complete wells already drilled but not yet completed (DUCs), and then (c) begin to drill more new wells. Those three pipelines aren’t the only ones that will get built…