The average monthly wholesale spot price for natural gas at the U.S. benchmark Henry Hub decreased by 20%, settling at $2.56 per million British thermal units (MMBtu) from January to June this year, as reported by Refinitiv Eikon. The Henry Hub price started at an average of $3.18/MMBtu in January but nosedived to $1.49/MMBtu in March, representing the lowest average monthly price when adjusted for inflation since at least 1997. Prices saw a downward trend throughout much of 2023, driven by unprecedented U.S. natural gas production alongside stagnant consumption.
A temperate winter concluded 2023, which led to even further price reductions in the early months of 2024. U.S. dry natural gas production reached an exceptional average of 106 billion cubic feet per day (Bcf/d) in November and December, coinciding with higher-than-normal temperatures that resulted in reduced consumption for heating purposes. Nevertheless, natural gas production experienced a decline in the first half of 2024, following a notable drop in mid-January linked to historically low pricing.
Total dry natural gas production dipped to 101.6 Bcf/d in April, marking the lowest output since December 2022, which recorded 100.2 Bcf/d.
Natural Gas Prices Hit Decade Low
This situation led to lower levels of natural gas being injected into U.S. storage during this injection season (April–October), with injections in May and June averaging 11% and 31% below their respective five-year averages. Despite this, inventories remain higher than the averages of the previous five years.
With production dropping and inventory levels approaching the previous five-year range, prices have risen since February and March, but they still sit near historical lows. The National Oceanic and Atmospheric Administration noted that December 2023 was the warmest December recorded in many U.S. regions, a month when households typically rely on natural gas for heating. In that month, the natural gas consumption in residential and commercial sectors averaged 34 Bcf/d, reflecting a 19% decrease compared to December the previous year.
Due to high levels of production and stable consumption, there was a smaller withdrawal of natural gas from storage during this winter season. The Weekly Natural Gas Storage Report indicates that during the winter 2023–24 heating period (November 1–March 31), the average U.S. working natural gas inventories were 13% above the average from the previous year and nearly 18% more than the five-year (2019–23) average. This relatively full storage helped maintain lower natural gas prices throughout the heating period.
The latest report for the week ending July 12, 2024, revealed that there was 17% more natural gas in U.S. working storage compared to the average for this time over the past five years.