Henry Hub spot gas price hits 15-week high as US market fundamentals tighten

Cash prices at the US Henry Hub are trading at their highest this week since the historic February freeze as rising summer natural gas demand meets with stumbling production and low storage levels.

In June 8 trading, the benchmark index broke above the $3 level for the first time in 15 weeks and has continued to test new highs since continued to test new highs, briefly topping $3.10/MMBtu. On June 10, the Henry Hub spot price was holding steady around $3.09/MMBtu, the Intercontinental Exchange data showed.

The recent surge in US gas prices comes as population-weighted temperatures along the Eastern Seaboard, the Southeast, and Texas edged up to over 80 degrees Fahrenheit earlier this week, pushing gas-fired electric cooling demand to its highest since last September. On June 9, the total US power burn was estimated at a nine-month high of 39.7 Bcf/d. As the early-June heat wave fades, power burn June 10 pulled back about 3 Bcf from its prior-day high, S&P Global Platts Analytics data showed.

Since April 1, US power burn has narrowly outpaced year-ago levels averaging about 100 MMcf/d, or a fraction of 1%, higher than in 2020 — despite significantly stronger gas prices this year. Rising demand from generators now accompanies more enduring strength in both industrial and export demand.

Since the start of April, industrial end-user demand has averaged just over 22 Bcf/d — up about 1.3 Bcf/d compared with the corresponding period in 2020. Demand from domestic LNG export terminals, meanwhile, has averaged nearly 11 Bcf/d, rising some 4 Bcf/d above the same comparison period, Platts Analytics data showed.

Supply

Recent gains in US gas demand have put an already tight domestic supply balance under pressure.

In June, US gas production has averaged just 90.6 Bcf/d, roughly flat to its second-quarter average but still well below its pre-pandemic highs at over 96 Bcf/d, according to Platts Analytics data.

Comparatively weak production levels come as many operators continue to hold the line on drilling and completion activity. In the week ending June 10, US rig count edged up to 560 — its highest since April 2020, but also well below pre-pandemic levels in the mid-800 rig range, Enervus data showed.

Constrained production and elevated demand have limited supply available for injection into gas storage this season. On June 10, the US Energy Information Administration released its latest storage report, estimating total US stocks at 2.41 Tcf as of the week ending June 4. Compared with year-ago levels, gas inventories are down 383 Bcf. Compared with the five-year average storage level, stocks are down 55 Bcf, EIA data showed.

Outlook

The 95 Bcf storage build EIA reported June 10 was only slightly above the five-year average injection, leaving intact recent momentum in the Henry Hub futures and forwards market. Following the report's release, the NYMEX prompt-month gas contract added about 10 cents, climbing to $3.20/MMBtu before settling just 2 cents higher on the day to $3.15/MMBtu, S&P Global Platts data showed.

For the peak-summer demand months extending through September, the forward curve average has strengthened to $3.12/MMBtu recently — up from an average of $2.97/MMBtu just a month ago, S&P Global Platts' most recently published M2MS data shows.