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Analysis: Henry Hub gas forwards turn bullish on tightening US supply-demand fundamentals


Bal-20 curve up 18%, or 32 cents, from late-June low

Power burn, industrial recovery support demand

Lower injection demand eases US storage surplus

Balance-2020 forwards prices at the Henry Hub are up sharply over the past month as rising gas demand and a recent contraction in supply bolster the outlook for winter gas prices.

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On July 28, the benchmark forward curve settled at an average $2.12 – up 18%, or more than 30 cents, from a late-June low at $1.80/MMBtu, S&P Global Platts' most recently published M2MS data shows.

In the cash market, Henry Hub gas prices have also been on the rise in late July, trading at more than $1.70 recently. On July 29, spot prices were down about 3 cents to $1.74. In late June, Henry Hub prices tumbled to a 21-year low, settling at $1.40 and averaging just $1.57/MMBtu during the month.

Stronger gas prices have accompanied recent gains in gas-fired power burn and industrial gas demand. Tightening supply-demand fundamentals have also been supported by smaller injections into US gas storage, which have been on par with or below historical averages in the past month.

Power burn

July to date, US power generators have burned a record 43.7 Bcf/d, setting new single-day records twice this month at over 45 Bcf/d and subsequently at over 46 Bcf/d, S&P Global Platts Analytics data shows.

Recent coal-fired power retirements, new combined-cycle gas capacity and hot temperatures have bolstered gas demand from power generators this summer. Additionally, historically low gas prices at under $2 have also supported the economics behind fuel-switching from coal to gas.

Gas share in the generation stack has been particularly strong in ERCOT, where gas has fueled over 53% of total generation in the past two weeks, up from a 41% share during first-half May. In SPP, generation share for gas is up 9 percentage points over the same period while in PJM it has climbed about 8 percentage points since mid-May. In the former two ISOs, lower wind generation has also bolstered market share for gas recently, S&P Global Platts data shows.

Industrial demand

A recent uptick in US industrial activity, which continues to recover from a second-quarter decline caused by the fallout from the coronavirus pandemic, has also supported total US gas demand recently.

Over the past two weeks, industrial gas demand has averaged over 20.4 Bcf/d, up nearly 1 Bcf/d, or about 5%, from its mid-June low at 19.5 Bcf/d. Recent gains have been supported largely by steep gains in demand from the refining and chemicals sectors and by a choppier rebound from the primary metals industry, Platts Analytics data shows.


Recent bullishness at the Henry Hub has also been supported by an easing in the US gas storage surplus.

In the past month, injections to gas storage have totaled 203 Bcf – 30 Bcf, or nearly 13% below the prior five-year average injection, data from the US Energy Information Administration shows.

Over the next three reporting weeks, Platts Analytics is forecasting storage injections to remain well below normal, totaling 88 Bcf compared to a historical average of 110 Bcf. At that pace, the US storage surplus would shrink to 414 Bcf – down from a 466 Bcf surplus in late June.