U.S. natural gas prices calmed after a volatile 2022 - U.S. Energy Information Administration (EIA) (2024)

In-brief analysis

June 4, 2024

U.S. natural gas prices calmed after a volatile 2022 - U.S. Energy Information Administration (EIA) (1)

Data source: Bloomberg L.P.
Note: Annualized percentage, a widely used trading measure of price volatility, is the standard deviation for the previous 30 days of daily changes in the Henry Hub front-month futures price multiplied by the square root of 252 (number of trading days in a year) multiplied by 100. Percentages are averages for that period.

As average prices of U.S. natural gas fell in 2023, natural gas prices also became less volatile compared with 2022. Historical volatility, a measure of daily price changes relative to average prices, eased from the recent highs reached in 2022. The measure of historical volatility we use here, which relates short-term price movements to average prices over a defined period, reached 171% for U.S. wholesale natural gas in February 2022, the most volatile since at least 1994. This 30-day historical volatility of U.S. natural gas prices is based on the U.S. benchmark Henry Hub front-month futures price. It averaged 69% in 2023 compared with 91% across all of 2022.

This approach to volatility is deliberately independent of how high prices are on average. Nevertheless, high percentages of historical wholesale natural gas price volatility came as prices were higher than average for many years prior to 2022. We discussed the drivers of U.S. natural gas pricing in early 2023, pointing out the prospects for lower, less volatile prices into 2023 at the time. The lower historical wholesale natural gas volatility we observed in 2023 came in addition to lower prices. So far in 2024, increased historical volatility has occurred even as prices have fallen to record lows.

U.S. natural gas prices calmed after a volatile 2022 - U.S. Energy Information Administration (EIA) (2)

Data source: CME Group; Bloomberg, L.P.
Note: Real prices are adjusted to March 2024 dollars.

After peaking in February 2022, monthly average historical natural gas price volatility was generally lower through the second quarter until increasing again in July to 105%. U.S. wholesale natural gas prices were particularly volatile in 2022 because of additional uncertainty caused, in part, by increased European demand for liquefied natural gas (LNG) following Russia’s full-scale invasion of Ukraine in February and the explosion at the Freeport LNG export terminal in June.

In 2023, historical wholesale natural gas price volatility peaked in January at an average of 99% and averaged 96% in the first quarter. At the same time, natural gas prices declined by 41% in January 2023 compared with December 2022, driven by less natural gas consumption for space heating because of warmer-than-average temperatures, increased natural gas production in the United States, and increased storage inventories. Less consumption and more production reduced natural gas withdrawals from storage in January by 55%, or 371 billion cubic feet, compared with the five-year (2018–22) average.

Historical price volatility generally fell in U.S. natural gas markets throughout 2023. On average, volatility reached a monthly low of 47% in December, the warmest on record in many U.S. locations, as less natural gas was consumed compared with December 2022 and as record monthly U.S. natural gas production reached its peak. Throughout 2023, with inventories of natural gas well above the five-year (2018–22) average and with no major disruptions that significantly changed market conditions, historical price volatility fell compared with 2022.

In 2023, the Henry Hub front-month futures price declined to average $2.66 per million British thermal units (MMBtu) compared with $6.54/MMBtu in 2022. Although it has been rising recently, the front-month Henry Hub natural gas futures price averaged $2.10/MMBtu in the first quarter of 2024 as its historical volatility averaged 80%.

In early 2024, the historical price volatility of wholesale U.S. natural gas averaged 92% in February. Disruptions to natural gas production, increased consumption to meet space-heating demand, and the third-largest withdrawal from natural gas storage on record for the week ending January 19, 2024, all due to Winter Storm Heather in January, contributed to increased historical volatility of wholesale U.S. natural gas prices.

Uncertainty about market conditions that affect natural gas supply and demand affect the volatility of prices. Consequently, significant amounts of natural gas in storage can make these uncertainties less critical and reduce exposure to volatility. According to our latest weekly report, as of May 24, 2024, almost 27% more natural gas was held in U.S. storage than at the same time of the year on average for the last five years.

Events that contribute to uncertainty in natural gas markets can include:

  • Production disruptions due to severe weather or other causes
  • Unplanned pipeline maintenance and outages
  • Significant departures from normal weather affecting consumption
  • Changes in natural gas inventory levels from expected levels
  • Use of natural gas and availability of other fuels for power generation
  • Unexpected or large changes in the volume of imports or exports
  • Trading activity

Principal contributor: Katy Fleury

Tags: natural gas, prices

U.S. natural gas prices calmed after a volatile 2022 - U.S. Energy Information Administration (EIA) (2024)


What is the EIA natural gas price forecast for 2022? ›

Forecast overview
Natural gas spot price (dollars per million BTU)6.402.50
U.S. LNG exports (billion cubic feet per day)1112
Shares of U.S. electricity generation (percentage)
10 more rows

What will natural gas volatility be in 2022? ›

This 30-day historical volatility of U.S. natural gas prices is based on the U.S. benchmark Henry Hub front-month futures price. It averaged 69% in 2023 compared with 91% across all of 2022. This approach to volatility is deliberately independent of how high prices are on average.

What is the price of natural gas in 2022? ›

According to the March 2024 Short-Term Energy Outlook, the Henry Hub spot price averaged $6.67 per Mcf in 2022 and $2.63 per Mcf in 2023. The sameforecast shows an average Henry Hub spot price of $2.36 per Mcf in 2024 and $3.06 per Mcf in 2025 (nominal prices).

Why did the price of natural gas decline in the United States? ›

Industry analysts point to a blend of lackluster demand and strong supply - as well as relatively mild oil prices worldwide. NEW YORK -- Gas prices are once again on the decline across the U.S., bringing some relief to drivers now paying a little less to fill up their tanks.

What is the prediction for natural gas prices? ›

In another report sent to Rigzone last month, BMI, a Fitch Solutions company, projected that the Henry Hub front month natural gas price will average $2.8 per MMBtu in 2024, $3.6 per MMBtu in 2025, $3.8 per MMBtu across 2026 and 2027, and $4.0 per MMBtu in 2028.

Why are natural gas prices so low right now? ›

The lowest inflation-adjusted prices in at least 34 years have drillers throttling down from record production. An unusually warm winter and roaring U.S. output have pushed natural-gas prices to some of the lowest levels of the shale era.

Why are natural gas prices so volatile? ›

What Causes Volatility In Natural Gas Prices? Major factors affecting volatility in gas markets include: Weather Changes: Weather is a strong determinant of short-term demand. Unexpected, prolonged, or severe changes in weather can cause fluctuations in the amount of natural gas that is demanded by end users.

What is the implied volatility of natural gas? ›

UNG IV Percentile Rank

UNG implied volatility (IV) is 65.9, which is in the 89% percentile rank. This means that 89% of the time the IV was lower in the last year than the current level. The current IV (65.9) is 19.6% above its 20 day moving average (55.1) indicating implied volatility is trending higher.

Will natural gas be more expensive in the future? ›

Prices should rise in 2025 as production falls and demand grows. Looking further out, demand is expected to pick up as natural gas exports increase, in the form of liquefied natural gas to Europe and Asia and through pipelines to Mexico. The commodity will continue to replace coal in the U.S., as it is phased out.

What is the current spot price of natural gas? ›

Basic Info. Henry Hub Natural Gas Spot Price is at a current level of 2.71, up from 2.61 the previous market day and up from 1.90 one year ago.

What is the all-time high price of natural gas? ›

Historically, Natural gas reached an all time high of 15.78 in December of 2005. Natural gas - data, forecasts, historical chart - was last updated on June 8 of 2024.

What are the trends in US oil and natural gas upstream costs 2022? ›

Oil and gas upstream capital expenditures increased by 39% in 2022 to $499 billion, the highest level since 2014 and the largest year-on-year gain in history. Higher costs primarily drive the increase in investment, but activity has also started to recover.

Why is natural gas so expensive all of a sudden? ›

Rising gas supply rates

Lower production in the U.S., disruptions overseas, and the effects of weather events and natural disasters all combine to lower supply at a time when demand is gaining. These situations are largely beyond our control and are hard to predict.

Why did Biden lower gas prices? ›

By adding gasoline to the marketplace at this time of year, the Biden administration aims to mitigate the risk of further price increases as even more drivers travel over the coming months, experts told ABC News.

Why is natural gas cheaper in the US? ›

America's abundance of natural gas and our extensive infrastructure keeps natural gas prices more affordable than other home energy sources.

What is the EIA LNG forecast? ›

US LNG exports will increase 2% in 2024 to average 12.2 bcfd. In 2025, EIA forecasts that LNG exports will grow by an additional 18% (2.1 bcfd).

What is the winter fuel outlook for EIA 2022? ›

Natural gas is forecasted to contribute 36% of total generation during the winter months of 2022–2023, whereas the U.S. electric power sector will have 26% more solar generating capacity, and a 9% increase in wind power capacity, which together contribute to 16% of U.S. total generation.

What is the stock price of natural gas forecast? ›

Natural gas is expected to trade at 2.62 USD/MMBtu by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 2.75 in 12 months time.


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