HOUSTON — Warm weather and strong production in 2015 drove down natural gas prices to their lowest average since 1999, according to a government analysis released Tuesday.
Natural gas spot prices at the nation’s central gas-trading Henry Hub in Louisiana averaged $2.61 per million British thermal unit through 2015, the lowest annual average level since the turn of the century, according to the U.S. Energy Information Administration. Spot prices value physical gas, as opposed to the more often cited futures contracts that price natural gas to be delivered at a later date.
Spot prices at Henry Hub opened relatively low last year and proceeded to fall. Natural gas became even cheaper when U.S. inventories rose to record levels during the summer. Gas is injected into storage during the warmer months so it can be drawn during the colder winter months to meet heating demand.
But the draws from inventories mostly failed to materialize in 2015, and when temperatures stayed warm in the early winter, prices collapsed. Daily spot prices fell below $2 per million British thermal unit for the first time since 2012.
The U.S. has several different physical markets for natural gas, each of which serve demand in a different region. Louisiana’s Henry Hub is considered the benchmark and is the delivery point for the next-month futures contract most often traded, but consumers in the Northeast are also impacted by a few other important markets. Prices between the hubs can vary because shipping constraints make it hard to even out spikes in demand that can happen during cold weather.
One of those spikes in demand drove spot prices up at two Northeast natural gas trading centers in early 2015. But prices quickly fell back to near the national benchmark, and stayed there for the rest of the year, the EIA said.