US natgas prices close below $2, benefiting chem margins

HOUSTON (ICIS)–US natural gas prices fell below $2 on Wednesday, which, barring the pandemic, represent the lowest winter-time level since 1997.

Prior to 2020, the last time the front-month contract for Henry Hub natural gas traded below $2/MMBtu in February was in 1997, according to the Energy Information Administration (EIA).

It is unusual for natural gas prices to fall to such low levels during the winter.

Some of the factors dragging down prices are high production, a growing share of renewable power and a warm winter, said Fauzeya Rahman, ICIS Americas LNG editor.

In October 2023, US meteorologists warned about warmer temperatures, which they attributed to the effects of the El Nino weather phenomenon.

Such low gas prices should benefit US petrochemical producers because they predominantly use ethane as a feedstock to produce ethylene.

Ethane prices tend to rise and fall with those of natural gas, while petrochemical prices tend to rise and fall with those of oil.

While prices for natural gas have fallen, those for oil have remained at $70-80/bbl.

Looking ahead, both oil and gas prices should rise as the year progresses, according to the latest Short Term Energy Outlook issued by the EIA.

For all of 2024, average spot prices for natural gas should be $2.65/MMBtu up from $2.54/MMBtu in 2023. In 2025, average spot prices should reach $2.94/MMBtu.

For Brent, oil prices should reach an average of $82.42/bbl in 2024, up slightly from $82.41/bbl in 2023. In 2025, average crude prices should fall to $79.48/bbl.

The following table shows daily prices for natural gas since 1997.

Source: EIA

Thumbnail shows a gas flame. Image by Shutterstock.