The EIA’s natural gas price forecasts
The EIA (U.S. Energy Information Administration), in its March 2018 “Short-Term Energy Outlook,” forecasted that Henry Hub natural gas prices will average $2.99 per MMBtu (million British thermal unit) in 2018 and $3.07 per MMBtu in 2019. According to the EIA, prices averaged $2.99 per MMBtu in 2017.
Narrowing price differentials in Appalachia
The onslaught in natural gas production in Appalachia didn’t meet with sufficient infrastructure and takeaway capacity to transport natural gas to demand centers and export locations. This imbalance led to prices at local hubs like Dominion South to trade at a discount to Henry Hub prices. However, recently, additional pipeline capacity has come online (see Part 4 of this series). As a result, price differences between Henry Hub and local trading hubs—including Dominion South in Pennsylvania, Transco Zone in New York City, and Algonquin Citygate near Boston—have improved. The spikes in Transco Zone in New York City and Algonquin Citygate spot prices resulted from cold weather.
The EIA noted that in the Northeast, there are tendencies for price spikes during periods of cold weather. In 2017, however, new pipeline capacity, along with warmer winter weather, helped to moderate price volatility.