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Chart in Focus: Natural Gas Prices and the Henry Hub Benchmark

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Natural gas prices

The January 2018 US natural gas futures contract price settled at $2.83 per MMBtu (million British thermal units), while the Henry Hub natural gas spot price was $2.80 per MMBtu when the market closed on December 11, 2017. The Henry Hub figure fell under the $2.90 per MMBtu that was recorded on December 4, 2017.

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STEO report

The EIA published the latest Short-Term Energy Outlook (or STEO) on December 12, 2017. The report projected the average Henry Hub natural gas spot price in 2018 to be $3.12 per MMBtu. The forecast figure is nearly 4.0% above the 2017 estimate of $3.01 per MMBtu.

In the STEO report, the EIA affirmed that predicted improvement in natural gas consumption, as well as exports in 2018, has led the agency to project a higher average Henry Hub price.

Weather forecast

According to the National Weather Service, the 2017–2018 winter season should be cooler than average in the Northwest region and warmer than average in the Southern states.

US natural gas prices have been falling since the week ended November 10, 2017, due to warmer-than-usual weather, oversupply, and weak natural gas demand. Lower gas prices may have a negative impact on the profitability of energy producers like Range Resources (RRC) and Chevron (CVX).

Effect on coal producers

Utilities prefer natural gas over coal when gas prices fall. Coal (KOL) miners like Peabody Energy (BTU) and Arch Coal (ARCH) lose out on market share when natural gas prices are comparatively weak. Similarly, they may be able to increase their market share when natural gas prices peak.

Continue to the next part of this series to see how crude oil prices affect coal.

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