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Analysis: Henry Hub winter natural gas prices hit record low

Denver — Balance-of-winter gas prices at the US benchmark Henry Hub sank to a record low recently as an increasingly robust supply outlook for this season continues to drag on market sentiment.

Falling to just $2.45/MMBtu, the January, February and March 2020 contract-average settled November 27 at its lowest dating back to 2013, S&P Global Platts' most recently published M2MS forwards data show.

In the cash market, Henry Hub gas has also faced downward pressure in recent weeks. After climbing into the mid-$2.80s/MMBtu in early November, prices have since fallen by over 20%, to levels around $2.25/MMBtu in Monday trading, according to preliminary settlement data.

While short-term weather forecasts appear to be driving weakness in the cash market, lower balance-of-winter prices come as strong US production and robust storage levels promise to keep the US market well supplied over the longer haul.

Adding to the bearish winter-season outlook, though, are medium-term weather forecasts that now predict above-average temperatures will endure across much of the continental US this winter.


Over the past 12 months, US production has grown by about 5.2 Bcf/d to an average 92.5 Bcf/d in the past 30 days. Over the same period, US domestic and export demand is up about 4.1 Bcf/d - effectively padding the US market with an additional 1.1 Bcf/d in supply, compared to this time last year.

Current forecasts from S&P Global Platts Analytics show production levels continuing to rise through the winter season too, approaching 93 Bcf/d by late first-quarter 2020.

Higher year-on-year storage levels are also promising to keep US markets well supplied this winter.

On Wednesday, the US Energy Information Administration reported a 28 Bcf drawdown from storage, leaving inventories at 3.610 Tcf for the week ending November 22. The bearish withdrawal undershot the 2018 and five-year average draws by 42 Bcf and 29 Bcf, respectively.

Currently, gas inventories stand 548 Bcf or about 18% above their corresponding 2018 levels. Inventories are 31 Bcf, or less than 1%, below five-year average levels.


In a series of forecasts released in late November, the US National Weather Service added fuel to the bearish near-term outlook for gas prices, predicting significant upside risk for temperatures this winter.

In a month-ahead and three-month outlook, the agency predicted a 33% to 50% chance for warmer-than-normal weather in almost every US region, excluding portions of the Midwest and Plains.

With above-average temperatures expected in key US heating regions including the Northeast, and portions of the US Midwest, residential-commercial heating demand could be expected to underperform.

In the Northeast, which faces a bigger risk for milder weather this winter, just a 2-degree upside temperature deviation in December could see heating demand underperform by over 1 Bcf/d, according to a demand-sensitivity analysis from Platts Analytics.

-- J. Robinson,

-- Edited by Rocco Canonica,