Summer natural gas price spreads between Henry Hub and Appalachian region have narrowed

Over the past decade, natural gas production in the Appalachian region has grown faster than capacity to move the gas into U.S. markets, pushing down local prices. More recently, pipeline infrastructure from Appalachia has increased capacity to deliver Appalachian natural gas to regional market, increasing relative spot prices at Appalachian hubs, and narrowing their price spreads relative to the U.S. natural gas price benchmark Henry Hub in Louisiana.

Natural gas production in the Appalachian region averaged 22 billion cubic feet per day (Bcf/d) in 2017, an increase of 25% from 2015 average levels. EIA’s latest data indicate that production has continued to increase, and production in the Appalachian region reached 26 Bcf/d in April 2018. Based on 2017 estimates, production in the Appalachian region accounted for almost half of total U.S. dry natural gas production.

The difference in price between Appalachian hubs and Henry Hub tends to follow a seasonal pattern. Generally, this price spread widens in the summer months (April through September) and narrows in the winter months (October through March), when demand in regions with more pipeline capacity increases in the winter months…

 

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