After plummeting to decade lows in March and April, Henry Hub prices surged by 60% since end of April amidst tighter supply fundamentals.
The key drivers behind this strong growth are:
(1) Production cuts: Appalachia dray gas suppliers started reducing their output when Henry Hub dipped below $2/mmbtu. overall US gas production drooped by 1% yoy since March;
(2) Stronger gas burn: gas-fired power generation rose by 6% yoy since the start of the year, providing a key outlet for surplus gas;
(3) Mexico’s gas thirst: exports to Mexico rose by a strong 10% yoy since the start of the year, primarily supported by higher gas-fired powgen and the continued decline in domestic production;
(4) Rising LNG feedgas flows: Freeport LNG is back at full speed with all three trains up and running after several months of maintenance and outages;
(5) Getting hotter: latest forecasts indicate more cooling demand over the summer months, which adds to the overall bullish mix.
Source: Greg Molnar
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