Summer Natural Gas Prices Reach 7-yr High!

Guest “Thanks Joe!” by David Middleton

JULY 22, 2021
Summer U.S. natural gas prices are the highest since 2014

In June, the U.S. natural gas spot price at the Henry Hub averaged $3.26 per million British thermal units (MMBtu), the highest price during any summer month (April–September) since 2014. Prices in July have increased from June, averaging $3.67/MMBtu through the first two weeks of July. Spot prices for July 14 in every one of the more than 175 pricing hubs tracked by Natural Gas Intelligence exceeded $3.00/MMBtu. These hubs include supply hubs that have traditionally traded at notable discounts to the Henry Hub, such as the Eastern Gas South hub (formerly known as Dominion South), located near production activities in the Appalachia Basin, and the Waha hub, located near production activities in the Permian Basin.

Tighter U.S. natural gas supply and demand balances in recent months contributed to price increases. This summer, more natural gas exports—both those sent by pipeline and those sent as liquefied natural gas—have reduced the supply available for domestic consumption. Warm weather this summer has also increased natural gas consumption for electric power. According to the National Oceanic and Atmospheric Administration (NOAA), June 2021 was the hottest June on record for the United States. Drought conditions in the western United States, in particular, have contributed to increased natural gas-fired generation to offset decreased hydroelectric generation. According to our Hourly Electric Grid Monitor, natural gas-fired generation in the Northwest averaged 240 gigawatthours (GWh) in June 2021, an increase of 50% compared with last year. During the same period, hydroelectric generation fell 20% to 410 GWh.

Less natural gas has been injected into working storage in the United States than average this summer, exerting further upward pressure on prices. According to our latest Weekly Natural Gas Storage Report, working natural gas in storage began the injection season (April 1–October 31) at 1,784 billion cubic feet (Bcf), only 24 Bcf less than the five-year average. U.S. working natural gas inventories are now at 2,629 Bcf, 189 Bcf below the five-year average and 543 Bcf below last year’s inventories at this time.

According to our latest Short-Term Energy Outlook, we expect that tight U.S. natural gas market balances will continue through the rest of 2021. We forecast the spot price at the Henry Hub will average above $3.00/MMBtu through March 2022 and will average $2.96/MMBtu in the second half of 2022.

Principal contributor: Stephen York

EIA
Source: Graph created by the U.S. Energy Information Administration (EIA), based on data from Natural Gas Intelligence
Note: Waha and Henry Hub prices for February 11–18, 2021, exceeded publication range. During this cold snap in Texas, Waha prices reached a high of $206.19/MMBtu on Feb 16, and Henry Hub prices reached a high of $23.86/MMBtu on Feb 17.

Natural gas prices are even booming in the Permian Basin (Waha Hub), where summer gas prices struggle to stay above $0/mmBtu.

Despite the Shamdemic lockdowns and Winter Storm Younger Dryas, US LNG exports continue to grow…

US LNG exports (million cubic feet/month) EIA.

In other good news…

SHORT-TERM ENERGY OUTLOOK
Release Date: July 7, 2021

[…]

One of the largest shifts in fuels for electricity generation in recent years has been the industry’s reduced use of coal and increased use of natural gas. Coal-fired electricity generation in the United States has declined almost every year over the past decade. The amount of U.S. coal generation in 2020 was 62% below its high in 2007. In contrast, natural gas generation grew by 86% between 2007 and 2020.

Both regulatory and economic factors are driving this trend of declining coal use and rising natural gas use. One of the most important drivers has been the sustained low cost of natural gas, which reached the lowest level in decades last year. In 2020, the price of natural gas delivered to electric generators averaged $2.39/MMBtu. However, natural gas prices have been rising in recent months now that the economy is beginning to recover from the effects of the pandemic, but U.S. production of natural gas is growing at a slower pace. In April 2021, the most recent available history, the delivered natural gas price to electricity generators averaged $3.04/MMBtu. Expected natural gas costs remain relatively elevated through the forecast and delivered prices average $3.44/MMBtu in 2H21.

These expected changes in the costs of fuels used for generating power will likely reverse some of the recent trends in the use of coal and natural gas for electricity generation, at least temporarily. We forecast that the natural gas-fired share of total U.S. generation will decline from 39% in 2020 to 36% in both 2021 and 2022, which would be close to what the natural gas share was in 2019. The expected rise in natural gas costs make coal more economical for electricity generation. The forecast share of generation from coal-fired power plants rises from 20% last year to 24% in 2021 and 22% in 2022.

[…]

EIA

Thanks Joe!

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Tom Halla
July 22, 2021 6:16 pm

The Green Blob’s attempts to restrict all fossil fuels apparently will have the effect of making coal more plants more economically viable by making gas more expensive.
Pretty much everything the Blob does works on the basis of unintended consequences.

The Saint
Reply to  Tom Halla
July 22, 2021 7:07 pm

He thinks spending more government money will bring inflation under control, too. Must be the Marxist School Of Nonsensical Economics.

Tom Halla
Reply to  The Saint
July 22, 2021 7:13 pm

It is more out of Fantasyland.

John the Econ
Reply to  The Saint
July 22, 2021 9:28 pm

I’m old enough to remember when saying such transparently ignorant things would yet one laughed off the stage. But today we now have a critical mass of equally ignorant trained seals to clap when such things are said.

Derg
Reply to  The Saint
July 23, 2021 5:51 am

They don’t care about inflation until they have to. Spending is power.

griff
Reply to  Tom Halla
July 23, 2021 12:57 am

Doesn’t seem to work that way in Europe.

aussiecol
Reply to  griff
July 23, 2021 4:48 am

Nothing seems to work that what ever you portray.

Ed Zuiderwijk
Reply to  griff
July 23, 2021 5:39 am

Germany has 70 coal or lignite fired plants and just finished constructing the last one a year ago.

Archer
Reply to  griff
July 23, 2021 5:40 am

It is in fact working that way in Europe. As of last month, coal use is up 15% across the continent due to high (and rising) gas prices and an increase in demand.

Last edited 8 days ago by Archer
It doesn't add up...
Reply to  Archer
July 23, 2021 6:56 am

…and failure ofwind generation

It doesn't add up...
Reply to  griff
July 23, 2021 6:56 am

Why has the UK been running its remaining coal capacity so much in recent days?

Chaswarnertoo
Reply to  It doesn't add up...
July 23, 2021 10:56 am

Because there’s sweet fanny adams wind?

MarkW2
Reply to  griff
July 23, 2021 7:43 am

Germany is the world’s largest importer of natural gas and wide open to price hikes, especially from Russia. Given Putin’s track record I wouldn’t say this is a great position to be in.

As for the UK, we’re now facing the real prospect of electricity blackouts during the winter as our system is creaking at the seams, largely due to increased reliance on wind while fossil fuel and older nuclear sites are taken out of use.

There is only one way this is going to go as the UK Government ploughs ahead with its crazy net-zero reduction plans, which will dramatically increase demand for electricity that simply won’t be available. Get ready for a massive backlash against the drive to net-zero as consumers finally realise what this will mean for their living standards and wallets.

European energy is a complete mess. The covid crisis has pushed people to their limits in Europe over government intervention and given what’s necessary to meet absurd CO2 reductions people will rebel against the leaders. We’ve already seen this in France and Switzerland while the German media are turning against the Government over the recent floods, which the politicians tried to blame on climate change.

In the UK the Government has stalled announcing plans for heat pumps because the costs are billions higher than they anticipated. The only “good” thing about all of this is that it will bring people to their senses as the reality hits home. It’s one thing for politicians to talk about this stuff but quite another when they have to start putting their ideas into practice, with the inevitable massive price hikes, energy shortages and massive disruption to people’s lives.

John Garrett
July 22, 2021 6:21 pm

The climate crackpots will never succeed in overthrowing the immutable laws of physics, basic arithmetic, supply and demand.

Abolition Man
Reply to  John Garrett
July 22, 2021 6:38 pm

John,
Never underestimate the proclivity of ignorant ideologues for running head first into brick walls! They may never knock it down, but ain’t it fun to watch them try; hair on fire and all!

Steve Case
Reply to  John Garrett
July 22, 2021 7:04 pm

They aren’t trying to overthrow the laws of physics, they want to overthrow you.

Barnes Moore
Reply to  John Garrett
July 23, 2021 6:59 am

Sorry, an official government decree will do the trick. It works every time.

Marc
July 22, 2021 6:28 pm

Henry Hub natural gas prices for August broke above $4 for a short while today and closed just below $4. $4 gas for August delivery is almost unheard of even when supplies are constrained. Unless something changes gas in storage will enter the winter heating season well below the 5 year average. One culprit contributing to this problem are citizens lawsuits brought by environmental groups to stop pipeline construction. This has been a particular problem for Appalachian production. Production in the Marcellus now exceeds pipeline take away capacity because citizens lawsuits have delayed (or stopped) construction on needed pipeline capacity. Who is willing to spend Capex dollars drilling gas wells if you are not sure you will be able to move the gas from the basin to the major gas markets ?

John Hultquist
Reply to  Marc
July 22, 2021 8:45 pm

gas in storage will enter the winter heating season well below the 5 year average. “

 That can’t be good!
Joe Bastardi just produced the theme of ‘cold Mays, followed by active hurricane season, is followed by cold winters in much of the USA ‘.

It doesn't add up...
Reply to  Marc
July 23, 2021 6:59 am

Inadequate gas in storage will be a big problem for Europe this winter too. Germany needs Nordstream II PDQ.

Reply to  It doesn't add up...
July 23, 2021 11:11 am

IDAU,
Agreed – though that nice Poisoner Putin chappie may decide not to use the line to its maximum if there might be an advantage to be gained.
Cold winter ahead across Europe, I fear – unless the solar farms find an unusual amount of sunshine . . . .

Auto – with a spare blanket on order!

Sweet Old Bob
July 22, 2021 6:34 pm

Brain Loss Matters …
😉

Nick schroeder
July 22, 2021 7:11 pm

Combined cycle power might be efficient but still burns a staggering amount of NG.
And they pay a lot more using it to make electricity than you and I will to heat water and air.
Basic supply and demand.
There will be long line of “We told you so’s.”

July 22, 2021 7:44 pm

Over the next three and a half year, Americans will find a lot more distressing things than higher Natural Gas Prices to pin on the Master of Blank Looks Matter.

Walter Sobchak
July 22, 2021 7:56 pm

NG is still very cheap per BTU compared to petroleum. 1 bbl oil has 6 MMbtu of enegy and costs ~$70. 6 MMbtu of NG costs less than $20.

RelPerm
Reply to  Walter Sobchak
July 23, 2021 9:56 am

What is the comparison to coal?

The primary reason for electricity generation going from coal to natural gas has been stable low cost natural gas supply. If tightening gas supply causes price to become higher and more erratic, coal could once again become preferred fuel for utilities.

Stay tuned for a few years to see this transition, it may take an election cycle.

richardw
July 22, 2021 11:37 pm

Not such good news for consumers! Restricting supply, as Biden plans, is increasing domestic and industrial energy prices. Maybe the plan is to make renewables look viable?

Kazinski
July 23, 2021 12:10 am

I do know I’m paying 2.59 a gal for propane this year, it was 1.99 last year. But that’s a lot cheaper than gasoline. I live off the grid in the summer, and use my generator for my well and heavy tools, solar for lights and electronics. And propane refrigerator, propane stove and hot water heater. I spend about 50 dollars a month on my summer utility bill.

Peta of Newark
July 23, 2021 12:50 am

and at a service station on the A1 in Leicestershire earlier this week, diesel was offered at 144.9 pence per litre
Cannot recall when exactly, not all that long ago, but that’s as high as its ever been

T’was barely over 100 pence ‘7 months ago’

While Boris the Buffoon tell,s us via the Office of National Statistics and Other Lies, that annual inflation is ‘above expected’ at 2.5%

(Hey Boris, did Carrie get any discount on her new £200K kitchen? Nah, thought not, tizza Bastid Thing that ‘inflation’ innit. In any case, do take-away pizza & chips need all that much cooking – judging your size and less-than-good health, mental and physical, no-one can see how your diet involves much else, apart the vino of course.)

Last edited 8 days ago by Peta of Newark
griff
July 23, 2021 12:57 am

The forecast share of generation from coal-fired power plants rises from 20% last year to 24% in 2021 and 22% in 2022.

Hmmm. A couple of minutes search showed me at least 5 coal power plant close announcements in recent months…

aussiecol
Reply to  griff
July 23, 2021 4:24 am

”China approved the construction of a further 36.9 GW of coal-fired capacity last year, three times more than a year earlier, bringing the total under construction to 88.1 GW. It now has 247 GW of coal power under development, enough to supply the whole of Germany.”

Chaswarnertoo
Reply to  griff
July 23, 2021 10:59 am

Griff, you really love displaying your idiocy.

John Garrett
July 23, 2021 4:31 am

As a longstanding follower of energy-related industries, I am very grateful for the contributions of David Middleton to this website.

Here’s a big THANK YOU !

aussiecol
Reply to  John Garrett
July 23, 2021 4:44 am

Hear hear.

aussiecol
Reply to  aussiecol
July 23, 2021 4:45 am

That should be : Here here

Loren C. Wilson
July 23, 2021 4:50 am

I am not sure that using the increase in electricity produced using natural gas versus the drop in electricity produced by falling water is a proof that June 2021 was the hottest on record in the USA. The article states: “the Northwest averaged 240 gigawatthours (GWh) in June 2021, an increase of 50% compared with last year. During the same period, hydroelectric generation fell 20% to 410 GWh”. That means 80 more GWh was produced using gas and 102.5 GWH less was produced using hydro, for a net change of -22.5 GWH. This number is negative, meaning Washington produced less electricity by these two methods in 2021 than it did in 2020. Hmmm…

Alan Watt, Climate Denialist Level 7
July 23, 2021 6:23 am

Coal-fired electricity generation in the United States has declined almost every year over the past decade. The amount of U.S. coal generation in 2020 was 62% below its high in 2007.

In another thread Rusty posted a link to this fascinating resource: a map of every coal-fired power station on the planet.

A little investigation revealed that in the decade 2009-2019 China, India and other asian nations added 640,702 MW of coal-fired electric generation. In the same decade everyone else (mostly the US) managed to retire just 134,557 MW of coal power. In other words new coal plants outpaced retiring coal plants by a factor of 4.5.

Any climate impact from the US using a bit more coal due to higher gas prices is completely swamped by the many times greater coal increases from China, India and other Asian countries.

It doesn't add up...
July 23, 2021 7:04 am

Keep those LNG exports flowing. Europe is going to need them this winter, using them to replenish storage meanwhile.

Coach Springer
July 23, 2021 7:28 am

Somehow, I think he likes it like that. Where is Sarah Palin when you need her?

Bruce Cobb
July 23, 2021 9:05 am

We need a program called “Build Coal Back Better”. Coal is the perfect antidote to volatile NG prices. But of course, the fossil fuel haters hate coal most of all. The producers of NG don’t like the competion from coal. Understandably so, I guess. Tough noogies.

July 23, 2021 12:22 pm

Natural gas prices are still about the same as, or less than, they were in 2017 after inflation. The current “7 year high” is not inflation-adjusted. Natural gas was cheap and displacing coal for about a decade and a half, and especially cheap from early 2015 to now. The fact that natural gas prices are currently actually low is despite greater demand for natural gas to generate electricity due to less use of coal and nuclear power, and increase of use of electric cars.

Doonman
Reply to  Donald L. Klipstein
July 23, 2021 5:05 pm

Nonsense. My natural gas bill has never been higher and my heating space is the same area with the same heating program controlling it for over 10 years.

All rates are set by approval of the Public Utility Commission. ALL applications for rate changes from the Utility company always go up, never down. None of the applications ever list inflation as the reason for the requested rate increases.

Postyournamehere
Reply to  Donald L. Klipstein
July 26, 2021 7:35 am

That’s a load of HS. Henry Hub averaged $2.955 in July of 2017. This year, we’re averaging $3.745 and it’s been over $4 for the last few days.

And why pick 2017? Why not 2018, or 2019?

2018 Henry averaged $2.80
2019 Henry averaged $2.30

Postyournamehere
July 26, 2021 6:36 am

I’m sorry, fan of the site, but Joe had nothing to do with this. America is now directly connected to the world natural gas market via ~11bcf/day of LNG export capacity. That export capacity didn’t spring up in the last 8 months.

And you are absolutely out of your mind if you think that Joe has killed off 11 Bcf/day of gas production.

Postyournamehere
Reply to  David Middleton
July 26, 2021 10:31 am

sorry I ruined it!

near and dear to my heart

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