US Natural Gas Prices Spike in Early May Amid Supply Constraints and Export Surge

Louisiana (USA): During the first week of May 2024, Natural Gas prices in the USA experienced a significant increase, driven by various supply and demand dynamics. The Henry Hub spot price rose from USD 1.63 per million British thermal units (MMBtu) to USD 2.01/MMBtu, marking a notable uptick. Similarly, the June 2024 NYMEX contract price increased from USD 1.932/MMBtu to USD 2.187/MMBtu, while the 12-month strip averaging June 2024 through May 2025 futures contracts rose to USD 2.967/MMBtu. These changes reflect a complex interplay of market forces, including supply disruptions, increased demand for power generation, and higher exports.

Supply-side dynamics played a crucial role in the price increase observed during this period. Temporary disruptions due to pipeline maintenance and production issues contributed to fluctuations in prices. Despite a slight increase in the total US Natural Gas supply, dry Natural Gas production saw a decline. Scheduled and unexpected maintenance activities on major Natural Gas pipelines, along with unforeseen wellbore maintenance or production stoppages at key production facilities, temporarily constrained supply.

Additionally, global LNG market trends, particularly increased demand in other major importing regions, indirectly influenced US Henry Hub LNG prices. Lower Natural Gas storage levels and reduced production further exacerbated supply constraints. US gas production fell by approximately 9% in 2024, driven by delays in well completions and reduced drilling activities by energy companies such as EQT and Chesapeake Energy. The merger between Chesapeake and Southwestern Energy, aimed at becoming the largest gas producer in the US, faced delays, adding to the market's volatility. Consequently, gas output in the Lower 48 US states decreased to an average of 96.9 billion cubic feet per day (bcf/d) in May, down from 98.1 bcf/d in April.

On the demand side, total US consumption of Natural Gas fell, particularly in the residential and commercial sectors, while consumption for power generation increased. Early summer preparations in industrial facilities and power plants contributed to building stockpiles of LNG in anticipation of higher summer demand for electricity generation and industrial processes.

Fluctuations in export volumes also influenced domestic prices. A sudden surge in LNG exports tightened domestic supplies, exerting upward pressure on prices. US Natural Gas futures reached a 14-week high, driven by forecasts for increased demand over the next two weeks and a continued decline in output. The amount of gas flowing to LNG export plants rose with the return to near-full service of the Freeport LNG plant in Texas, further supporting higher prices.

Looking ahead, several factors are expected to influence Natural Gas prices in the USA. Lower-than-usual storage levels raise concerns about potential supply shortages, potentially driving prices up. Global Natural Gas price fluctuations could indirectly impact US prices, incentivizing further LNG exports and tightening domestic supply. Additionally, the severity of summer heatwaves, global LNG market dynamics, and US Natural Gas storage levels at the beginning of summer are key factors that will shape price trends.