US Natural Gas Prices Expected to Stay High
Natural gas prices could remain somewhat elevated given the lingering impact of the February freeze in Texas and the strains from a foreign appetite for US LNG, market reports on March 12 suggested.
Natural gas prices have returned to seasonal norms following the February cold snap that saw key indices hit double digits on the back of unprecedented demand. The US Energy Information Administration (EIA) noted earlier in March that the benchmark Henry Hub spot price hit US$23.86/mn Btu on February 17, the highest in 18 years. Henry Hub averaged $5.49/mn Btu in February, the highest monthly average in seven years, the EIA said.
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Pricing agency S&P Global Platts noted March 12 that traders in East Texas are betting on the continuation of a tight market due to the inclement weather in February and because of a high demand for US exported natural gas.
Henry Hub was trading closer to $2.50/mn Btu on March 15 as the lingering impact from Texas outages subsided. But Texas-based prices were at a discount to the benchmark. The Henry Hub premium usually shrinks during times of peak demand, though the impact on Texas suggests the benchmark will remain elevated given the direct impact on Texas gas production and storage.
In its latest weekly estimate, the EIA reported that total working natural gas stocks are about 13% below year-ago levels and 7% below the five-year average. Alongside the low storage levels, however, the Federal Reserve Bank of Dallas last week said that US president Joe Biden’s moves to restrict oil and gas activities on federal lands could limit production from the New Mexico side of the Permian basin, half of which comes from federal lands.
Elsewhere, the EIA noted the foreign appetite for US natural gas is increasing as economies, particularly those in Asia, recover from the demand destruction brought on by the pandemic last year.