Commodity Market Report

North America gas short-term outlook March 2020: Henry Hub reaches a 25-year low

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20 March 2020

North America gas short-term outlook March 2020: Henry Hub reaches a 25-year low

Report summary

We’re in uncharted waters here. Henry Hub has reached a 25-year low as the market has shifted focus from associated gas declines resulting from the oil price collapse to the magnitude and duration of demand loss expected from the coronavirus pandemic. One hopes for optimism. Distinctive front and back markets are developing. The first, bearish after a mild winter with over 2 tcf in storage and expected steep declines in Q2 2020 economic activity, will allow an entrance to the 2020/2021 winter with ample supplies. The back market, though, looks to be a perfect storm of bullishness: structural production declines juxtaposed with a rebound of economic activity. For even a modest storage refill, Henry Hub will need to roar above $2.50 to incentivize dry gas production. First things first, though. The front market will need to resolve before we chart a course through the more distant future.

Table of contents

  • Henry Hub gas prices are at 25-year record lows as the market focus on associated gas declines due to the oil price collapse has shifted to the magnitude and duration of demand loss expected from the coronavirus pandemic. We are in uncharted territory, with assumptions constantly being revised. Although a high degree of uncertainty exists, we stay optimistic and expect structural associated gas declines to have a greater impact longer-term, while the demand losses hopefully should be more temporary.
  • Based on such, a distinctive market of front and back is developing. The front market remains bearish coming out of winter with over 2 tcf in storage. Expected steep declines in Q2 2020 economic activity allows October 2020 storage to enter next winter with ample supplies and a touch higher than the five-year average near 3.8 tcf. However, the back market is expected to have structural production declines steepening juxtaposed with a rebound of economic activity. In order for October 2021 storage to refill even to a low 3 tcf, Henry Hub will need to roar above $2.50 to incentivize a return of dry gas drilling in the Northeast and Haynesville. But first and foremost, we need to resolve the front market before narrowing the uncertainty on the back market.
  • There are risks of infrastructure delays due to reduced workforce; however, Waha basis has significantly tightened due to lower associated gas production.

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What's included

This report contains:

  • Document

    Basis Outlook.xls

    XLS 113.00 KB

  • Document

    Demand Detail.xls

    XLS 761.50 KB

  • Document

    Industrial Index.xls

    XLS 113.50 KB

  • Document

    LNG Detail incl Export.xls

    XLS 223.50 KB

  • Document

    NGL Price Outlook.xls

    XLS 177.50 KB

  • Document

    Northeast Takeaway Capacity.xlsx

    XLSX 471.16 KB

  • Document

    Power Demand Curve.xls

    XLS 182.50 KB

  • Document

    Price Outlook.xls

    XLS 121.50 KB

  • Document

    Storage Outlook.xls

    XLS 161.00 KB

  • Document

    Supply Demand Balances.xls

    XLS 319.00 KB

  • Document

    Supply Detail.xlsx

    XLSX 257.07 KB

  • Document

    North America gas short-term outlook March 2020 Henry Hub reaches a 25-year low.pdf

    PDF 3.96 MB

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