The most severe global gas price swings in the aftermath of the Russian invasion of Ukraine have focussed on Europe as an epicentre, given the path to 100 $/mmbtu and back to below 20 $/mmbtu. That should not downplay the volatility the U.S. gas market has faced this year, against a backdrop of the largest price moves for over 10 years.

Since August, February 2023, Henry Hub prices have dropped by 60% (and 50% in the last three months) as:

• The Freeport outage has pushed over 2 bcf/d (1.3 mt/month) of feedgas back into the U.S. market (the restart may be delayed further into February)
• Cold snaps in December have been followed by a milder January (with lower heating demand days vs seasonal normal)
• The EIA increase the 2023 gas production forecast by 2.4 bcf/d (1.5 mt/month) to 109 bcf/d (70 mt/month).

The prompt decline has pushed the curve into contango, given the relatively small decline in calendar 2025 prices, (down only 9% since August). The pivoting of the curve is driven by a lack of new liquefaction capacity forecast until late 2024. Feedgas demand will then start to increase significantly, requiring attractive prices to incentive new drilling against a continued backdrop of producer capital discipline.

The significant increase in U.S. liquefaction capacity will have several impacts on the relationship of the U.S. gas market to the wider global gas markets:

• Increased proportion of global LNG indexed to Henry Hub, increasing derivative liquidity from hedging
• Increasing volume of LNG supply indexed to Henry Hub that can be “shut-in” when the global market is oversupplied, (e.g., importance of Henry Hub as a soft floor).

Due to the flexibility being lost in the European gas market, global gas market volatility is likely to continue between this soft Henry Hub floor and the demand response ceiling.

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