US Natural Gas Market Disconnects from Global Prices Amid Structural Surplus

The natural gas market in the US is experiencing a disconnect from global prices due to a structural surplus of supply. The Henry Hub price, a benchmark for US natural gas, has been trading at $2.957 per MMBtu, up 1.09% from the previous day. This is despite European and Asian markets paying significantly more for natural gas, with the European benchmark trading around $20.70 per MMBtu.

The dislocation in prices is attributed to a combination of factors, including record levels of dry gas production in the Lower 48 states, high storage inventories above the five-year average, and limited export capacity through liquefaction facilities. This has resulted in American natural gas pricing a supply glut, while every other energy market on the planet is pricing a supply crisis.

The weekly Energy Information Administration (EIA) natural gas storage report is expected to be released today at 10:30 am Eastern time, with consensus expecting a build of 29 billion cubic feet against a five-year average injection of 30 Bcf. A print close to the seasonal norm would keep weather in control of the tape and does nothing to resolve the surplus.

The structural position remains comfortable, with US working gas inventories standing at 6% above the five-year average as of the end of June. The agency forecasts inventories reaching 3,966 Bcf by the end of October, which is a well-supplied carry-out into the heating season.