A March Price Below $1.50 and a July Burn Record: The US Gas Market Is Pricing a Surplus That Power Demand Is Eating

The first half of 2024 gave the US gas market its lowest prices in a generation. The Henry Hub monthly average fell from $3.18 per million British thermal units in January to $1.49 in March, which the Energy Information Administration says was the lowest inflation-adjusted monthly average since at least 1997. Over the six months from January to June, the monthly price fell 20% to $2.56. On July 9, power plants in the Lower 48 burned enough gas to generate 6.9 million megawatthours of electricity in a single day, probably the most in history and certainly the most since the EIA began collecting hourly data in January 2019.

The price collapse was caused by a surplus built up over a warm winter. The EIA's explanation of the low prices is a familiar one by now. Prices fell through much of 2023 on record production, flat consumption and high inventories. With storage full and production high, there was nowhere for additional gas to go. By the week of July 12, gas in Lower 48 storage totaled 3,209 billion cubic feet. That was 17%, or 465 Bcf, above the five-year average and 8% above the same week of 2023.

Net injections since April 1 had totaled 950 Bcf by the EIA's July 18 report. Much of it reflects demand, and the July generation record shows where. The EIA attributes the July 9 spike to two things: high temperatures across most of the country, and a steep drop in wind generation. That combination is likely to become more common as the fleet changes. The arithmetic for the end of the injection season, at the close of October, is straightforward. The first half of 2024 will be remembered for its record low prices. For buyers, that argues for caution in assuming low prices will persist into 2025.