In the first half of 2020, natural gas prices at Henry Hub reached record lows. The Henry Hub is a distribution hub on the natural gas pipeline system in Erath, Louisiana, U.S.

The average monthly spot price in the first six months of the year was $1.81 per million British thermal units (MMBtu). Monthly prices reached a low of $1.63/MMBtu in June, which was the lowest monthly inflation-adjusted (real) price since at least 1989. 

Prices started the year low because of mild winter weather, which resulted in less natural gas demand for space heating. Beginning in March, spring weather and the economic slowdown induced by mitigation efforts for the coronavirus disease 2019 (COVID-19) contributed to lower demand, further lowering prices.

Warmer-than-normal temperatures from January through to March resulted in more natural gas than average in underground storage at the end of the heating season. The traditional heating season runs between 1 November and 31 March. Injections into underground storage so far during the 2020 refill season (1 April to 31 October) have also been relatively high, lagging behind only 2019 and 2015 for total net injections for the Lower 48 U.S. states in May. High storage levels indicated high natural gas production relative to consumer demand.

Contributing to high U.S. storage levels and lower prices has been a decline in liquefied natural gas (LNG) exports. Demand for U.S. liquefied natural gas exports has fallen by half in the first half of 2020, from 9.8 billion cubic feet per day (Bcf/d) in late March to less than 4.0 Bcf/d in June. U.S. industrial demand is down by 0.6 Bcf/d, or 2.7%, compared with the first half of 2019.

The U.S. Energy Information Administration (EIA) expects that the low price of natural gas will encourage more natural gas consumption in the electric power sector in 2020, which is already 7% higher in the first half of 2020 compared with last year. 

EIA expects consumption in all other sectors to decline and that overall 2020 natural gas consumption will decline by 3 billion ft3/d. EIA expects natural gas spot prices to rise by the fourth quarter of 2020 as production falls and the winter heating season begins.

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20th July 2020