Natural Gas

Prices: The front-month natural gas futures contract for delivery at the Henry Hub settled at $2.73 per million British thermal units (MMBtu) on January 7, 2021, which is down 15 cents/MMBtu from December 1, 2020 (Figure 4).

The front-month futures price in December showed considerable volatility, driven by shifts in weather and higher-than-average stock draws. Since December 1, there have been two negative price swings of more than 15% that were each followed by positive price swings of more than 15%. During the first swing, from December 1–8, the front-month futures price decreased by 48 cents/MMBtu, to $2.40/MMBtu, before increasing to $2.78/MMBtu on December 22. During the second price swing, from December 22–28, the front-month futures price decreased again by 48 cents/MMBtu, to $2.31/MMBtu, before increasing to $2.73/MMBtu on January 7. Although temperatures for December were warmer than normal, a nor’easter in mid-December temporarily increased heating demand in the Northeast, which may have contributed to some price volatility. In addition, despite warmer temperatures overall, more natural gas was drawn from U.S. stocks, likely because the United States exported liquefied natural gas (LNG) at record levels for the second consecutive month while production declined. EIA estimates inventories fell by 555 billion cubic feet (Bcf) in December, 83 Bcf higher than the five-year (2015–19) average. Inventory levels, however, remained 197 Bcf (6%) higher than the five-year average at the end of December.