U.S. spot natural gas prices plunged to a 25-year low at the Henry Hub benchmark in Louisiana and dropped into negative territory for a record 47th time at the Waha hub in West Texas, according to pricing data for Monday from financial firm LSEG.
Energy traders that noted mild weather has weighed on next-day Henry Hub prices for much of this year, keeping both heating and cooling demand lower than normal.
Those low next-day Henry Hub prices have kept pressure on Henry Hub futures traded on the New York Mercantile Exchange, with spot contracts trading below front-month futures on 190 out of 217 trading days so far this year, according to LSEG.
Next-day prices at the Henry Hub NG-W-HH-SNL were down about 19% to $1.21 per mmBtu for Monday, their lowest since hitting a record low of $1.03 on Dec. 4, 1998.
Analysts have said that so long as spot prices remain far enough below front-month futures NGc1 to cover margin and storage costs, traders should be able to lock in arbitrage profits by buying spot gas, storing it and selling a futures contract.
Monday is also the U.S. Veterans Day holiday. In addition to mild weather, demand for gas is usually low on holidays, when many businesses and government offices are closed.
Next-day prices at the Waha hub NG-WAH-WTX-SNL plunged about 431% to a negative $1.06 per mmBtu. The Waha hub is located in the Permian Basin oil-producing shale region.
Analysts have said that Waha prices traded in negative territory on five of the six trading days so far this month due in part to pipeline constraints caused by maintenance on Kinder Morgan’s KMI.N 2.7-billion-cubic-feet-per-day (bcfd) Permian Highway gas pipe in Texas, which was expected to end on Nov. 14.
Those negative prices have come even though pipeline constraints have eased since the new 2.5-bcfd Matterhorn gas pipe entered service in recent months. The Matterhorn moves gas from the Permian to the Houston area.
Waha prices first averaged below zero in 2019. It happened 17 times in 2019, six times in 200 and once in 2023, mostly due to pipeline constraints that trapped gas in the basin.
SPOT PRICES
Henry Hub prices have averaged $2.10 per mmBtu so far in 2024, down from $2.54 in 2023 and a five-year average (2019-2023) of $3.49, according to LSEG data.
The lowest annual average for prices at the Henry Hub was $2.11 per mmBtu in 2020 when the COVID-19 pandemic destroyed demand for the fuel, according to U.S. Energy Information Administration data going back to 1997.
Waha prices have averaged 60 cents per mmBtu so far in 2024, down from $1.82 in 2023 and a five-year average of $2.91.
The lowest annual average for Waha price was 91 cents per mmBtu in 2019, according to LSEG data going back to 1991.
Source: Reuters (Reporting by Scott DiSavino; editing by Jonathan Oatis)