Average Natural Gas Spot Prices Hit 16-Year Low in 2015

Across the board, 2015 was a historic year for natural gas.

Earlier this week, the U.S. Energy Information Administration (EIA) reported that natural gas spot prices at the Henry Hub in Louisiana – a national benchmark for the price of natural gas – finished at an average of $2.61 per million British thermal unit (MMBtu) in 2015, the lowest annual average since 1999. Daily prices also fell below $2/MMBtu for the first time since 2012.

What contributed to the major drop in the price of natural gas? 

Three main factors: record natural gas production, record working natural gas in storage, and above-average temperatures in Q4. In 2015, total natural gas production averaged an estimated 74.9 billion cubic feet per day (Bcf/d) – a significant 6.3 percent increase over 2014.

In October, EIA also found that U.S. working natural gas in storage matched the all-time record of 3,929 Bcf. A few weeks later, storage levels broke the all-time record at 3,978 Bcf, just shy of 4 trillion cubic feet (Tcf) mark. Exceedingly mild temperatures in Q4 in key consumption regions – especially in the U.S. Northeast – contributed to increased storage injections.

Despite low average prices in 2015 – and now 2016 – long-term natural gas prices may not be as bearish. Recent price information indicates that long-term prices are beginning to rebound, potentially due to increasing natural gas power generation or the lifted ban for natural gas exports.

To learn more about the structure of natural gas prices, check out the Weekly Energy Market Update. And to learn how your business can take advantage of low natural gas prices, please visit our Natural Gas page.