NYMEX Henry Hub, US spot gas prices plunge, production gains ease tight supply

Prices for US natural gas spot and futures plunged in May 9 trading amid higher US gas production and a forecast reprieve from the late-season cold snaps that have kept residential-commercial demand elevated.

The NYMEX Henry Hub prompt-month contract fell $1.017 to $7.026/MMBtu on May 9, preliminary settlement data from the CME Group showed. The pricing movement was the prompt-month's largest single day movement since late January, with daily swings of more than $1 in either direction rare even as volatility has increased in recent months.

May 9 marked a second consecutive trading session of downward momentum for the NYMEX Henry Hub June, as the contract stepped back from the 13-year high of $8.783/MMBtu reached on May 5.

Spot gas prices across the United States also tumbled in May 9 trading for next-day flows, with the historic futures rally pulling physical prices along for the ride in recent weeks. Daily decreases ranged from 30 cents to more than $1/MMBtu, with most pricing locations in all regions remaining in a range of $7-$8/MMBtu, preliminary settlement data from S&P Global Commodity Insights showed.

Supply and demand

US gas production has increased over the last week to average 94.3 Bcf/d May 7-9, up from averaging 93.2 Bcf/d in the seven days prior from April 30-May 6, according to data from S&P Global. Gas production crossed the 94 Bcf/d threshold on only eight occasions during the first four months of 2022, with year-to-date production averaging 93.1 Bcf/d.

The recent production increases largely came from the Permian, SCOOP/STACK, and Bakken – all associated natural gas basins. Platts has assessed its US Gulf Coast benchmark American Gulf Coast Select above $100/b month-to-date, with the price rising above $110/b on some days this month.

Even as US gas production has risen, the unseasonably cold temperatures that have struck the Northeast and Central IS regions in recent weeks were forecast to thaw over the next seven days.

So far this May, Northeast res-comm demand has come in 510 MMcf, or 10%, higher than the same time last year. Similarly, local demand for gas in the Midcontinent and Midwest has come in around 940 MMcf, or 7%, higher month-to-date compared to the year prior.

Outlook

A forecast heat wave could keep a floor under gas prices over the next week, with gas-fired power demand absorbing some of the higher production.

The Midcontinent and Texas are forecast to bear the brunt of the above-average temperatures through May 14, CustomWeather forecasts showed. The average Midcontinent temperature is expected to come in 17 degrees higher than normal during May 10-12 and 10 degrees higher on May 13. Similarly, Texas was forecast to see the average temperature come in seven to 11 degrees above normal May 9-12.