High natural gas production and storage injections in September drove U.S. prices down
Data source: U.S. Energy Information Administration, Weekly Natural Gas Storage Report
Injections into U.S. working natural gas storage in the Lower 48 states during the 2022 injection season (April through October) have brought storage levels back near historical averages. The overall increase in natural gas storage was driven primarily by five consecutive triple-digit increases in September and early October. U.S. natural gas injections totaled 427 billion cubic feet (Bcf) in September—a month that included the second-largest weekly net injection on record during the week ending September 30 (129 Bcf), according to data from our Weekly Natural Gas Storage Report (WNGSR), a report that dates back to 1993. In September, reduced seasonal demand and strong natural gas production led to more natural gas injections into underground storage and lower natural gas spot prices.
For the past five injection seasons, an average of 18% of natural gas injections into storage during the refill season occurred during September. We currently estimate that this September, natural gas injections into storage accounted for 21% of the total, according to WNGSR and our Short-Term Energy Outlook (STEO).
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook (STEO)
U.S. natural gas production has increased to meet growing demand for U.S. liquefied natural gas (LNG) exports throughout the year. In 2019, dry natural gas production averaged 92.9 billion cubic feer per day (Bcf/d) in the United States before declining in 2020, largely because of the economic impacts of the COVID-19 pandemic. U.S. natural gas production has grown through 2021 and 2022. So far in 2022, dry natural gas production has averaged record volumes (over 96 Bcf/d), up 4% from last year and up 2.2% from 2019 annual production. In September, daily U.S. dry natural gas production exceeded 97 Bcf/d every day in September and exceeded 100 Bcf/d on seven days, according to data from PointLogic.
Data source: U.S. Energy Information Administration, Dry shale gas production estimates by play
Increases in natural gas production from shale plays have been driving growth in U.S. natural gas production this year and, so far, shale natural gas production has accounted for 78% of all U.S. dry natural gas production. The Permian Basin and Haynesville play in the U.S. Gulf region have led in production growth, and they reached record production highs this summer.
In September, dry natural gas production for the Haynesville play increased 51% from September 2019, averaging 13.7 Bcf/d. Permian Basin production was up 40% from September 2019, averaging 15.4 Bcf/d. These plays' infrastructure and proximity to the U.S. Gulf Coast’s LNG export terminals attract new operators, especially with relatively high summer spot prices at the U.S. benchmark Henry Hub.
Domestic demand for natural gas and natural gas-fired electricity fell in September because lower seasonal temperatures reduced demand for heating and cooling in buildings. These factors, coupled with high production, has allowed more natural gas to be injected into working storage.
The Henry Hub natural gas spot price fell more than 30% throughout September, averaging $9.38 per million British thermal units (MMBtu) on September 1 and $6.40/MMBtu on September 30. In early October, natural gas prices fell below $6.00/MMBtu. More analysis is available in our upcoming STEO, which is scheduled for release on November 8.
Principal contributor: Kirby Lawrence
Tags: natural gas, production/supply, storage, prices