Natural gas spot prices to fall 19% this summer amid milder weather

Henry Hub natural gas spot prices for June, July and August are expected to be an average of $2.37 per million British thermal units, and if realized, this would be the lowest spot prices for summer since 1998, according to the U.S. Energy Information Administration (EIA). Henry Hub natural gas prices are expected to be 19%, or 55 cents per million British thermal units, lower than the prices last summer.

Henry Hub natural gas prices were $2.40 per million British thermal units in June after the prices declined for three consecutive months. Since March, the prices have fallen 19%.

Spot prices at trading hubs across the nation have traded close to the Henry Hub price. Prices were $2.12 per million British thermal units in June at the Transcontinental Pipeline Zone 6 trading point for New York City and the Chicago Citygate, down 25% and 23%, respectively, from the same month in 2018. The highest June price was $2.59 per million British thermal units at the PG&E Citygate near San Francisco, a 14% decrease from June 2018.

The recent declines in natural gas prices can be attributed to the mild weather for the start of the summer that led to lower than expected natural gas-fired electricity generation, while natural gas inventory injections exceeded the previous five-year average rate. Between April and June, net injections into underground storage fields have exceeded the five-year average by 41%, and this has reduced the five-year average deficit by more than 300 billion cubic feet. The lower price also reflects the rise in U.S. drilling activity and average well productivity, which are higher than previously expected, according to the EIA.

But if summer temperatures were warmer than expected, electricity consumption, natural gas-fired electricity generation and natural gas prices could exceed projections.

The rise in the natural gas supply is expected to moderate in late 2019, and in 2020, natural gas prices are expected to increase. Henry Hub natural gas spot prices are projected to be $2.50 per million British thermal units in the second half of 2019 and $2.77 per million British thermal units in 2020.