Henry Hub prices have gone global

Henry Hub gas prices have gone global. Historically, unlike WTI oil prices, Henry Hub gas prices were an “island” and not impacted by global market dynamics. However, times have changed as US LNG feed gas requirements for exports have reached close to 10 bcfd, or 10% of the total US gas market. This figure is expected to increase to 12% next summer.

US gas producers can no longer be detached from global gas markets. An oversupplied global gas market, exacerbated by the coronavirus pandemic, has resulted in US LNG utilization rates swinging down 7 bcfd this summer, pushing Henry Hub gas prices to record lows. European and Asian gas markets are key to determining whether we will see a sequel to the “great US LNG pushback” next summer. To the delight of US gas producers, Wood Mackenzie’s latest global LNG short-term outlook does not see a repeat, supported by a recovery of LNG demand and a rebalancing European market. Instead, higher Henry Hub gas prices lie ahead in 2021 as dry gas production from the Northeast and Haynesville will need to be incentivized in order to refill storage in preparations for winter 2021/22.

But there are risks. With a global gas market finely balanced over the next two years, the pace of economic and gas/LNG demand recovery in Asia and Europe, as well as Russia’s access to pipeline infrastructure, will influence utilization of US LNG projects. US LNG is not out of the woods yet.

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