Natural Gas Price Forecast: Henry Hub To Stay Range-Bound In Short Term

BMI View : For our short-term forecast for US Henry Hub gas prices, we expect range-bound trading to persist through 2013 and 2014. In 2013, the yearly average is forecast to come in at about US$3.75/mnBTU. A well-supplied gas market thanks to a steady increase in shale gas production and consumer price sensitivity will prevent drastic price increases, as export and infrastructure restrictions limit the reach of gas beyond the North American market. The same dynamics are likely to prevail in 2014, though market expectations for a tightening of supply could see prices trend higher particularly towards the latter half of 2014.

The shale gas boom in the US has dramatically altered gas price dynamics in the world's largest gas market. After years of steady increases, the onset of shale gas production sent prices that had briefly recovered from the 2008 crash back down from 2010 and hit a ten-year low of US$1.90 per mn British Thermal Units (mnBTU) in February 2012.

A glut in US gas supplies created by the shale gas revolution and exacerbated by legislation against gas exports beyond North America have given rise to low US prices. Once trading at around parity with the UK 's benchmark National Balancing Point (NBP), US Henry Hub is now heavily discounted to the UK benchmark - a reflection of US abundance in gas as opposed to the tight supply market beyond North America.

Shale Gale Crashes Prices
Front-Month Monthly Henry Hub (US$/mnBTU)

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This article is tagged to:
Sector: Oil & Gas
Geography: Global

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