Republished January 7, 2014, text was modified to clarify content.
Average wholesale (spot) prices for natural gas increased significantly throughout the United States in 2013 compared to 2012. The average wholesale price for natural gas at Henry Hub in Erath, Louisiana, the key benchmark location for pricing throughout the United States, rose 35% to $3.73 per million British thermal units (MMBtu) in 2013. Increased winter demand pushed inventories down and prices up to above $4.00/MMBtu in March and April, but decreased consumption for electric generation over the summer and positive (but flattening) production growth kept 2013 prices at their lowest level since 2002 with the exception of 2012.
The price increases were relatively uniform, except in the northeastern United States, where cold-weather-driven demand spikes exacerbated the impact of pipeline constraints in Boston and New York City markets. The importance of supply changes for prices is shown at the Transco Leidy Hub in Pennsylvania where prices in 2013 were only 11% higher than in 2012, despite much greater absolute and percentage price increases at nearby hubs serving New York City and Boston. The Leidy Hub prices were most directly affected by continued growth in production from the Marcellus shale.
Natural gas price movements often fall into season patterns, which held true in 2013, but also fall into regional patterns and affected production volumes as well as the futures market. Key trends along these lines are discussed below:
January-April. Spot prices rose at the beginning of 2013 and exceeded $4.00/MMBtu in March, a level not reached since September 2011.
May-December. Spot prices decreased starting in May, and by August had declined to a monthly average of $3.40/MMBtu, before rising back above $4.00/MMBtu by year's end.
Regional price differences. The 2013 price increase, much like the decrease in 2012, was relatively uniform throughout most of the United States, except in parts of the Northeast.
Production. Natural gas dry production rose by 1% in 2013 over year-ago levels, according to the Short-Term Energy Outlook. Although this growth can be considered relatively flat compared to the 7% annual growth in 2011 and 5% annual growth in 2012, it limited the degree to which prices rose over last year's 13-year low.
Futures markets. Natural gas markets witnessed reduced seasonality in 2013, with smaller differences between natural gas spot prices and contracts for future delivery.
Principal contributor: Mike Ford
Tags: exports/imports, map, Marcellus, natural gas, prices, production/supply, storage