Henry Hub natgas price drops to a 25-year low, while Waha is in negative territory
According to LSEG's pricing data, U.S. natural gas spot prices fell to a new 25-year low in Louisiana at the Henry Hub benchmark and entered negative territory at the Waha hub for the 47th consecutive time.
The energy traders noted that the mild weather this year has had a negative impact on Henry Hub prices next day, resulting in lower heating and cooling demands than usual.
LSEG reports that Henry Hub futures have been under pressure due to the low prices of next-day Henry Hub contracts. Spot contracts traded below Henry Hub front-month futures in 190 out 217 trading sessions so far this calendar year.
Henry Hub offers next-day delivery at a discount
Analysts say that as long as spot prices are far enough below the front-month contracts to cover margins and storage costs, traders can lock in arbitrage profit by purchasing spot gas, storing and selling a contract for futures.
Veterans Day is observed in the United States on Monday. The mild weather and the fact that many government offices and businesses are closed on holidays usually reduce demand for gasoline.
Prices for next-day delivery at the Waha hub
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 2.7-billion-cubic-feet-per-day (bcfd) Permian Highway gas pipe in Texas, which was expected to end on Nov. 14.
These negative prices are occurring despite the fact that pipeline restrictions have decreased since the recent installation of the new Matterhorn pipe, which can transport 2.5 bcfd. The Matterhorn transports gas from the Permian basin to the Houston region.
In 2019, Waha prices averaged the first time below zero. This happened 17 times between 2019 and 2023. It was mainly due to pipeline restrictions that trapped gas within the basin.
SPOT PRICES
According to LSEG, Henry Hub prices are down to $2.10 per mmBtu in 2024 from $2.54 per mmBtu in 2023. The five-year average price (2019-2023), however, is $3.49.
According to U.S. Energy Information Administration (EIA) data dating back to 1997, the lowest average annual price at the Henry Hub in 2020 was $2.11/mmBtu when the COVID-19 epidemic destroyed demand for fuel.
Prices for Waha have been on average 60 cents/mmBtu in 2024. This is down from $1.82 per mmBtu in 2023, and $2.91 over the past five years.
According to LSEG, the lowest average annual Waha price in 2019 was 91 cents/mmBtu. (Reporting and editing by Jonathan Oatis; Scott DiSavino)
(source: Reuters)
