US Natural Gas Prices Fall To Lowest Level Since 2020

The U.S. benchmark natural gas price experienced a sharp decline on Tuesday, falling by up to 10% to reach its lowest level since September 2020. This price drop was caused by milder weather conditions, which led to lower demand for natural gas. On Wednesday, the cost of natural gas at the Henry Hub was recorded at approximately $2.043 per million British thermal units (MMBtu), which indicates a 1.59% decrease.

The plummeting prices observed in recent weeks can be attributed to several factors, including a mild start to January, consistently high supply, and an outage at the Freeport LNG export facility. The benchmark U.S. natural gas prices have been impacted by mild weather and high production, resulting in a decrease of $6 per MMBtu from mid-December and over $9 per MMBtu from August 2022. This translates to a crash of nearly 80% from August to February.

According to last week’s Weekly Natural Gas Storage Report by the EIA, the stocks of working gas in storage were 328 Bcf higher than last year at this time and 183 Bcf above the five-year average.

The price slide can also be attributed to the imminent expiration of the front-month contract on February 24.

EBW Analytics Group analyst Eli Rubin stated that the technical outlook for natural gas prices is “strongly bearish.” Last Friday, prices dropped below the “critical technical support” at the $2.35 per MMBtu level. However, Rubin noted that "solidifying fundamentals may offer support after the March contract rolls off the board and April becomes the front-month contract."

The Energy Information Administration's Short-Term Energy Outlook (STEO) for February forecasts a 30% reduction in the Henry Hub spot price, estimating $3.40 per MMBtu for 2023, down from $4.90 per MMBtu in the January forecast. The Henry Hub natural gas price averaged $6.42 per MMBtu last year.

If you are looking to take advantage of this major dip in the market contact us to learn more about natural gas procurement!