April 2024 highlights
  • Recent rise in Henry Hub price volatility driven by weather conditions and LNG facility outages.
  • Storage value influenced by summer/winter spreads and spot price volatility.
  • LNG export capacity expansion & variable power generation sources expected to drive short-cycle storage value through greater near-term gas price volatility.

Henry Hub spot price volatility driving storage value

The U.S. Natural Gas market has seen a rise in both Henry Hub spot and month-ahead price volatility across the past six months, driving value for short-cycle storage capacity holders. This volatility has been driven by several key factors:

  • In January, freezing weather conditions caused extreme spot price fluctuations, with a notable impact also seen in the front-month price.
  • A bout of warm winter weather sank price levels in February before leading major producers to scale back production, further increasing market volatility.
  • March and April saw a combination of planned and unplanned outages at the Freeport LNG facility, reducing nominations and adding renewed pressure to Henry Hub prices.

Storage value is driven by two key price signals: summer and winter price spreads influence the value of seasonal flexibility, while spot price volatility drives the value of shorter-term gas deliverability. The significant planned expansion of LNG export capacity will boost the influence of feed gas demand variability as a major source of spot price volatility. Additionally, the growing deployment of variable generation sources will further contribute to short-term gas-burn variability.

This trend places emphasis on the role of fast-cycle storage in mitigating future gas price volatility and ensuring liquidity in the underlying asset trade.

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