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.