2021 U.S. Natural Gas Monthly Settlement Prices

JAN:  $2.467

FEB:  $2.760

MAR:  $2.854

APR:  $2.586

MAY:  $2.925

JUN:  $2.984

JUL:  $3.617

AUG:  $4.044

SEP:  $4.370

OCT:  $5.841

NOV: $6.202

DEC: $5.447

AVERAGE MONTHLY PRICE FOR 2021: $3.841

2022 U.S. Natural Gas Monthly Settlement Prices

JAN:  $4.024

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U.S. market mechanisms

The natural gas market in the United States is split between the financial (futures) market, based on the NYMEX futures contract, and the physical market, the price paid for actual deliveries of natural gas and individual delivery points around the United States. Market mechanisms in Europe and other parts of the world are similar, but not as well developed or complex as in the United States.

Futures market

The standardized NYMEX natural gas futures contract is for delivery of 10,000 million Btu of energy (approximately 10,000,000 cu ft or 280,000 m3 of gas) at Henry Hub in Louisiana over a given delivery month consisting of a varying number of days. As a coarse approximation, 1000 cu ft of natural gas ≈ 1 million Btu ≈ 1 GJ. Monthly contracts expire 3–5 days in advance of the first day of the delivery month, at which points traders may either settle their positions financially with other traders in the market (if they have not done so already) or choose to "go physical" and accept delivery of physical natural gas (which is actually quite rare in the financial market).

Most financial transactions for natural gas actually take place off exchange in the over-the-counter (OTC) markets using "look-alike" contracts that match the general terms and characteristics of the NYMEX futures contract and settle against the final NYMEX contract value, but that are not subject to the regulations and market rules required on the actual exchange.

It is also important to note that nearly all participants in the financial gas market, whether on or off exchange, participate solely as a financial exercise in order to profit from the net cash flows that occur when financial contracts are settled among counterparties at the expiration of a trading contract. This practice allows for the hedging of financial exposure to transactions in the physical market by allowing physical suppliers and users of natural gas to net their gains in the financial market against the cost of their physical transactions that will occur later on. It also allows individuals and organizations with no need or exposure to large quantities of physical natural gas to participate in the natural gas market for the sole purpose of gaining from trading activities.

Physical market

Generally speaking, physical prices at the beginning of any calendar month at any particular delivery location are based on the final settled forward financial price for a given delivery period, plus the settled "basis" value for that location (see below). Once a forward contract period has expired, gas is then traded daily in a "day ahead market" wherein prices for any particular day (or occasional 2-3-day period when weekends and holidays are involved) are determined on the preceding day by traders using localized supply and demand conditions, in particular weather forecasts, at a particular delivery location. The average of all of the individual daily markets in a given month is then referred to as the "index" price for that month at that particular location, and it is not uncommon for the index price for a particular month to vary greatly from the settled futures price (plus basis) from a month earlier.

Many market participants, especially those transacting in gas at the wellhead stage, then add or subtract a small amount to the nearest physical market price to arrive at their ultimate final transaction price.

Once a particular day's gas obligations are finalized in the day-ahead market, traders (or more commonly lower-level personnel in the organization known as, "schedulers") will work together with counterparties and pipeline representatives to "schedule" the flows of gas into ("injections") and out of ("withdrawals") individual pipelines and meters. Because, in general, injections must equal withdrawals (i.e. the net volume injected and withdrawn on the pipeline should equal zero), pipeline scheduling and regulations are a major driver of trading activities, and quite often the financial penalties inflicted by pipelines onto shippers who violate their terms of service are well in excess of losses a trader may otherwise incur in the market correcting the problem.

Basis market

Because market conditions vary between Henry Hub and the roughly 40 or so physical trading locations around United States, financial traders also usually transact simultaneously in financial "basis" contracts intended to approximate these difference in geography and local market conditions. The rules around these contracts - and the conditions under which they are traded - are nearly identical to those for the underlying gas futures contract.

Derivatives and market instruments

Because the U.S. natural gas market is so large and well developed and has many independent parts, it enables many market participants to transact under complex structures and to use market instruments that are not otherwise available in a simple commodity market where the only transactions available are to purchase or sell the underlying product. For instance, options and other derivative transactions are very common, especially in the OTC market, as are "swap" transactions where participants exchange rights to future cash flows based on underlying index prices or delivery obligations or time periods. Participants use these tools to further hedge their financial exposure to the underlying price of natural gas.

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And the explanation was enough to make me ok with it.

         XTO Price Paid

  January-$2.33

 February-$3.44

     March-$2.57

        April-$2.39

        May-$2.62

       June-$2.85

I think that most, if not all, the E TX Haynesville production goes through the Carthage Hub.  Not sure about volumes on the far south end of the E TX fairway.  Some LA gas along the state line is also transported to Carthage.

https://www.naturalgasintel.com/data-snapshot/daily-gpi/ETXCARTH/

XTO Price for July is $3.42

XTO did you good for July, my Vine price was 3.21

CHK paid prices

Jan - $2.68 - $2.69 > 11/20 prod. date

Feb - $2.57 - $2.58 > 12/20    "       "

Mar - $2.42 - $2.43 > 1/21      "       "

Apr - $2.82 - $2.83 > 2/21      "        "

May - $2.65 - $2.66 > 3/21      "        "

Jun - $2.44 - $2.45 > 4/21       "        "

Jul - $2.77 - $2.78 > 5/21        "        "

Aug - $2.88 - $2.89 > 6/21      "         "

XCO paid prices

Jan - $2.55 - $2.56 > 11/20 prod. date

Feb - $2.51 - $2.52 > 12/20    "        "

Mar - $2.39 - $2.40 > 1/21     "         "

Apr - $2.90 - $2.91 > 2/21     "         "

May - $2.61 - $2.90 > 3/21    "         "

Jun - $2.22 - $2.23 > 4/21     "        "

Jul - $2.67- $2.69 > 5/21      "         "

Aug - $2.86- $2.88 > 6/21    "        "

(Bloomberg) 9/28/2021 -- Natural gas prices surged to a fresh seven-year high in the U.S. as the expiration of October options added momentum to a rally fueled by escalating concerns about tight winter supplies.

Gas for October delivery gained 11%, the biggest daily jump since February, settling at $5.706 per million British thermal units, a level not seen since early 2014. Traders were closing out bearish positions ahead of the expiration of October options and futures this week. Shares of gas producers also soared amid broader energy-market gains, with EQT Corp. up as much as 12% and Southwestern Energy Co. climbing 24%.

Prices for the heating and power-generation fuel are soaring globally with low stockpiles in Europe and Asia sparking fears of shortages as winter approaches. In the U.S., storm-related supply disruptions have compounded concerns about slow output growth as drillers heed investors’ calls for financial restraint, making it unlikely that shale producers will be able to bail out the rest of the world this winter.

“The commodity is getting repriced in terms of its value,” said John Kilduff, founding partner at Again Capital. “There’s such a demand for it around the world.”

The premium for gas delivered in March versus April -- essentially a bet on how tight supplies of the fuel will be at end of winter -- has climbed to the highest for this time of year since 2005. U.S. gas stockpiles are 6.9% below the average for the past five years, government data show, and the nation is poised to send more cargoes of the fuel overseas as new export capacity comes online.

About 24% of gas production in the U.S. Gulf of Mexico is still shut after Hurricane Ida landed, according to the Bureau of Safety and Environmental Enforcement. Operations in the region are not expected to fully recover until next year.

With no major production increases seen for the next several months and export plants running close to full capacity on strong Europe and Asia demand, “the perception of a shortage can easily be a reality if we see a cold December,” says Dennis Kissler, a senior vice president at Bok Financial Securities. Still, the market may be poised for a “large correction” if U.S. temperatures move into seasonal norms, he adds.

Meanwhile, gas traders are paying increasingly more for options contracts to protect against a potential price surge this winter. Implied volatility -- a measure of how expensive options are -- has jumped to a record 107% on February contracts, up from 68% a month ago, according to exchange data compiled by Bloomberg.

NOTE:  A separate article this morning states $6.28.  I will correct the post once it is clear which price is correct.

The correct settlement price for October is $5.841 and the average monthly price through October is $3.445.

So what would be your guess that we should get paid on for month of October?  5.841 or 3.445?  

$3.445 is the average of the monthly settlement prices through October, so ten month average.  It has no relevance for the October monthly settlement price.  You should be paid based on some discount to the monthly price.  Since you have the monthly settlement prices to date, you could compare them to your royalty statement prices to see if the discount is the same over that period.  There may be some reasonably close correlation for gas sold at the same hub over that period.  Of course if you know your hub and can find the monthly price for it, you may get an even closer correlation than you do for the Henry Hub price.  For E TX gas, I'd look to the Carthage Hub for the best basis price for a particular month.

I've sent SWN/Indigo an email with my payment prices for the year versus Henry Hub asking why the inconsistency in percentage from month to month.  I highlighted that February was a 43% difference in payout versus the HH price.  I'll post their response once I get it.

I think the Carthage Hub is the better comparable for E TX Haynesville gas but I understand the focus on the Henry Hub as it has been the long time primary basis hub price nationally.  Other hubs post prices that are premiums (rarely) or discounts (more often than not) to the HH price.

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