Henry Hub Prices Come Under Downward Pressure

Henry Hub prices have come under downward pressure recently due to the effects of hurricanes that have reduced natural gas demand.

That’s what Bill Weatherburn, a Senior Climate and Commodities Economist at Capital Economics, told Rigzone when asked why the U.S. natural gas price is dropping.

When asked the same question, Phil Flynn, a Senior Market Analyst at the PRICE Futures Group, told Rigzone that Hurricane Milton knocked out power to over 3.35 million people, “giving a hit to demand”.

“Gulf natural gas production [is] not impacted and is at full strength … So, demand destruction selling,” he added.

Jim Krane, a Research Fellow at Rice University’s Baker Institute, told Rigzone that U.S. natural gas prices have been volatile lately.

“There’s been a lot of uncertainty about hurricane-related power outages in Florida killing off gas demand,” he said.

“But in the longer-term demand should rebound on cooling temperatures and power restoration in Florida,” he added.

Art Hogan, Chief Market Strategist at B. Riley Wealth, told Rigzone that “natural gas prices seem to be reacting to both the U.S. Energy Information Administration data that showed an increase in production last week, and a downgrade of Hurricane Milton as it exits Florida”.

A Rystad Energy gas and LNG market update from Rystad Senior Analyst Masanori Odaka, which was sent to Rigzone by the Rystad team earlier on Thursday, noted that “the front-month Henry Hub gas price was 7.8 percent lower week on week at approximately $2.7 per million British thermal units (MMBtu) on 9 October”.

“Total feed gas levels for U.S. LNG projects increased to around 12.8 billion cubic feet per day (Bcfd), 5.5 percent higher week on week,” it added.

“Cove Point LNG is likely to resume soon, although it remains offline for planned annual maintenance expected to last from 20 September to 10 October, which had significantly reduced feed gas flow as of 9 October,” it continued.

“Rystad Energy forecasts approximately 103 million cubic feet per day of dry gas on average will be produced in October 2024,” the update went on to state.

As of 8am EDT on October 10, Hurricane Milton had maximum sustained winds of 85 miles per hour and an 18 mile per hour east-northeast movement, the National Oceanic and Atmospheric Administration’s (NOAA) National Hurricane Center (NHC) website showed.

At the time of writing, the NHC site is tracking two additional weather disturbances in the Atlantic. These comprise Hurricane Leslie and an unnamed disturbance situated in the Eastern Tropical Atlantic.

“There is a danger of life-threatening storm surge along the coast from east-central Florida northward to southern Georgia, where a storm surge warning remains in effect,” an advisory posted on the NHC site at 5am EDT on October 10 stated.

“Damaging hurricane force winds, especially in gusts, will continue for a few more hours in east central and northeastern Florida. Residents are urged to remain in an interior room and away from windows,” it added.

“Heavy rainfall across the central to northern Florida Peninsula through this morning continues to bring the risk of considerable flash and urban flooding along with moderate to major river flooding, especially in areas where coastal and inland flooding combine to increase the overall flood threat,” it continued.

In a statement posted on its website back in August, NOAA warned that “atmospheric and oceanic conditions continue to support an above-normal 2024 Atlantic hurricane season, with a 90 percent probability of this result”.

“2024 has only a 10 percent chance of a near-normal season and a negligible chance of a below-normal season,” it added at the time.

To contact the author, email andreas.exarheas@rigzone.com