EIA: Summer US natural gas prices highest since 2014

The average US natural gas spot price at Henry Hub was $3.26/MMbtu in June, the highest price in any summer month (April to September) since 2014. Prices in July have been higher than in June, and the average price in the first 2 weeks of July was $3.67/MMbtu. Spot prices for July 14 in every one of the more than 175 pricing hubs tracked by Natural Gas Intelligence exceeded $3.00/MMbtu. These hubs include supply hubs that have traditionally traded at notable discounts to Henry Hub, such as Eastern Gas South hub (formerly Dominion South), near production activities in the Appalachia basin, and Waha hub, near production activities in the Permian basin.

Tighter US natural gas supply and demand balances in recent months contributed to price increases. This summer, more natural gas exports—both those sent by pipeline and those sent as LNG—have reduced the supply available for domestic consumption. Warm weather this summer has also increased natural gas consumption for electric power. According to the National Oceanic and Atmospheric Administration (NOAA), June 2021 was the hottest June on record for the US. Drought conditions in the western US have contributed to increased natural gas-fired generation to offset decreased hydroelectric generation. According to EIA’s Hourly Electric Grid Monitor, natural gas-fired generation in the Northwest averaged 240 gigawatthours (GWh) in June 2021, an increase of 50% compared with last year. During the same period, hydroelectric generation fell 20% to 410 GWh.

Less natural gas has been injected into working storage in the US than average this summer, exerting further upward pressure on prices. According to EIA’s latest Weekly Natural Gas Storage Report, working natural gas in storage began the injection season (Apr. 1–Oct. 31) at 1,784 bcf, only 24 bcf less than the 5-year average. US working natural gas inventories are now at 2,629 bcf, 189 bcf below the 5-year average and 543 bcf below last year’s inventories at this time.

EIA expects that tight US natural gas market balances will continue through the rest of 2021. The agency forecasts the spot price at Henry Hub will average above $3.00/MMbtu through March 2022 and will average $2.96/MMbtu in second-half 2022.