The spot price of the U.S. natural gas benchmark Henry Hub hit record lows in the first half of 2020 due to mild winter early in the year and depressed demand later on with the pandemic, the Energy Information Administration (EIA) said on Monday.
The average monthly Henry Hub spot price in the first six months of 2020 was $1.81 per million British thermal units (MMBtu). Monthly prices reached as low as $1.63 per MMBtu in June, the lowest monthly inflation-adjusted price since at least 1989, according to EIA estimates.
The monthly average Henry Hub price was less than $2/MMBtu in each month from February through June. Before 2020, the real Henry Hub price had averaged less than $2/MMBtu in just one month—March 2016, the EIA noted.
Natural gas prices plunged to a 25-year-low at the end of last month, due to continued weakness in demand.
The milder winter early in 2020 and the economic slowdown due to the measures to contain the coronavirus pandemic resulted in lower demand for natural gas, which depressed natural gas prices.
The relatively high level of natural gas in storage has also depressed prices. Gas inventories have stayed high not only due to weak domestic demand, but also because of depressed demand for liquefied natural gas (LNG) exports out of the U.S. in the first half of 2020, the EIA said.
Historically low natural gas prices from Asia to Europe and lower demand in the pandemic have resulted in U.S. exports of LNG crashing by more than 50 percent this year, the EIA said last month.
In its latest Short-Term Energy Outlook (STEO) from last week, the EIA predicts that prices will begin to recover later in 2020, thanks to rising demand and declining production. The EIA sees the Henry Hub spot price averaging $2.46/MMBtu in Q4 2020, bringing the 2020 annual average to $1.93/MMBtu.
Next year, the Henry Hub price is set to average as much as $3.10/MMBtu, due to continued decline in production, the EIA says.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.