U.S. NATURAL GAS MONTHLY SETTLEMENT PRICE TRACKER
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
FEB: $6.265
MAR: $4.568
APR: $5.336
MAY: $7.267
JUN: $8.908
JUL: $6.551
AUG: $8.687
SEPT: $9.353
OCT: $6.868
NOV: $5.186
DEC: $6.712
YEAR-TO-DATE AVG: $6.644
2023 U.S. Natural Gas Monthly Settlement Prices
JAN: $4.709
FEB: $3.109
MAR: $2.451
APR: $1.991
MAY: $2.117
JUN: $2.181
JUL: $2.603
AUG: $2.492
SEP: $2.556
OCT: $2.764
NOV: $3.164
DEC: $2.706
YEAR-TO-DATE AVG: $2.737
2024 U.S. Natural Gas Monthly Settlement Prices
JAN: $2.619
FEB: $2.490
MAR: $1.615
APR: $1.575
MAY: $1.614
JUN: $2.493
JUL: $2.628
AUG:$1.907
SEP: $1.930
OCT: $2.585
NOV: $2.346
YEAR -TO-DATE AVG: $2.164
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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.
Views: 22843
Replies to This Discussion
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Permalink Reply by Mister Sunday on -
I don't suppose it really matters what they pay me, because every once in a while I'll get a check with multiple pages of explanations. The last one they sent me went over eight different prior months and took another $40+ out of the current check they were paying me on. I don't like it, but I guess I could be getting nothing...
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Permalink Reply by Skip Peel - Mineral Consultant on
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I think many royalty recipients feel that way. Trying to understand much less keep up with payment and deduction data isn't an easy task. The industry seeks to keep it that way and regulators are of little help for mineral lessors. Occasionally courts do require operators to be more transparent. At least one verdict in the not too distant past went against an operator that used internal code numbers for post production deduction categories without providing a key that indicated what each code number represented. The court ruled that the statement data must be transparent so that the average mineral lessor could know the category for each deduction. Because of this ruling I suspect that some operators that attempt to hide the details of their deductions may provide the lessor with a key upon request/demand and some I believe have even changed how they label deduction categories to be more transparent.
More importantly actually is the fact that a majority of mineral lessors do not know if the eight digit decimal interest that informs their payments is accurate. Calculating the correct decimal interest is simple math. Acres owned within the unit divided by the total number of acres in the unit times the lessor's royalty fraction. The industry attempts to hide the variables required to make that simple computation.
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Permalink Reply by Mister Sunday on
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No, I'll have to admit, everything is well marked. However, they will take a past check, credit the amount of the check back to themselves, readjust something in the deductions, then put the amount of the new check back into the statement. Almost always at a detriment to the current months payment.
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Permalink Reply by Skip Peel - Mineral Consultant on
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November settlement price: $6.202. 2021 average per monthly settlement price through Nov.: $3.695
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Permalink Reply by Iris on
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So Skip, how would a lessee know if royalties rec'd are fair. I suppose that is what you are answering in reply to Mister Sunday.
I'm not anywhere near that yet, if ever. Received another notice from Trinity Properties re: combining units in Section 12 T18N 4 and T19N 33 mostly stating that applicant didn't file for public hearing until October 25.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Once you are "in pay" and receive your first royalty check, the first thing to do is to calculate your eight digit decimal interest. We can visit that when the time comes but that's not what Mister Sunday and I are discussing. We are discussing the price that he sees on his royalty statement compared to the Henry Hub settlement price for August. Henry Hub is the base price for all sales hubs and all hubs have an adjusted base price that is used for a seller and buyer to agree on a price for gas delivered through that hub. In his case, XTO got a price that was a 6% discount to the published Henry Hub price.
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Permalink Reply by Mister Sunday on
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XTO August Price Paid $3.79
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Permalink Reply by Skip Peel - Mineral Consultant on
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Thanks. That would be about a 6% discount to the Henry Hub August settlement. Pretty good.
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Permalink Reply by M B Gilster on
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CHK $3.80 - 3.86 > TGN $3.55 & XCO $3.58 - 3.71 > all for Aug. production
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Permalink Reply by Skip Peel - Mineral Consultant on
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Thanks, MB. Nice to see that Chesapeake (CHK) is the best of that bunch for August. I can't recall that being the case in the past.
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