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.

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Replies to This Discussion

Permalink Reply by Steve P on April 1, 2023 at 3:07

I can’t recall seeing the price drop below $2 over the past 15 years

Permalink Reply by Mister Sunday on May 20, 2023 at 0:09

XTO's price for KEYDETS A-47 4H is

11/22- $4.79

12/22- $6.00

1/23- $4.01

2/23- $2.66

3/23- $2.26

Permalink Reply by Skip Peel - Mineral Consultant on April 1, 2023 at 3:17

A number of months were below $2 in 2020.  When this happens the percentage of royalty income lost to post production costs goes up significantly as they are based on an mcf, not on the gross price.  2023 may be a rerun of 2020.

$2.02

$1.91

$1.79

$1.74

$1.75

$1.63

$1.77

$2.30

$1.92

$2.39

$2.61

$2.59
Permalink Reply by Mister Sunday on May 20, 2023 at 0:01

I plan on going back through the post and putting each of these values for the settlement price XTO gave me on the KEYDETS A-47 4H well, but I thought I'd drop them all right here as well.

9/22- $7.90

10/22- $5.73

11/22- $4.79

12/22- $6.00

1/23- $4.01

2/23- $2.66

3/23- $2.26

Permalink Reply by Skip Peel - Mineral Consultant on May 20, 2023 at 1:50

Thanks again, Mister Sunday.  It's helpful for members to compare monthly gross mcf price.  Are the dates you post the date the royalty payment was received?  Or, the date of the monthly production volume.  We often remind members that payments usually follow production volume by at least two months.  For example January production would be expected to be paid in late March.

Permalink Reply by Mister Sunday on May 20, 2023 at 10:24

It is the date of the production volume as listed on the check stub.  I have received all of these on one stub and I’m pulling them out as XTO reported them.

Permalink Reply by Skip Peel - Mineral Consultant on May 20, 2023 at 10:33

Thanks.  That should help.

Permalink Reply by richard v. simmons on May 24, 2023 at 3:08

Interesting! 3 wells in Sabine Parish. Starting in November 22.                                                                                                        BRUMLEY 8H-1 A  Southwestern                                                                                                                                                          09/22-8.25                                                                                                                                                                                              10/22-5.90                                                                                                                                                                                              11/22-4.47                                                                                                                                                                                              12/22-5.84                                                                                                                                                                                              01/23-3.99                                                                                                                                                                                            02/23-2.66                                                                                                                                                                                              CHKMIN 20-29-32HC-01 ALT CHESAPEAKE                                                                                                                                        09/22-8.10                                                                                                                                                                                              10/22-5.57                                                                                                                                                                                              1/22-4.13                                                                                                                                                                                              12/22-5.67                                                                                                                                                                                              01/23-3.79                                                                                                                                                                                              02/23-2.44                                                                                                                                                                                              CHKMIN 20-29HC-01 ALT  CHESAPEAKE   wells are about 30 yards apart                                                                                        09/22-8.12                                                                                                                                                                                              10/22-5.59                                                                                                                                                                                            11/22-4.14                                                                                                                                                                                              12/22-5.67                                                                                                                                                                                            01/23-3.79                                                                                                                                                                                              02/23-2.44                                                                                                                                                                                              It seems that CHESAPEAKE is consistently paying 20 to 40 cents less per MMF!
Permalink Reply by Skip Peel - Mineral Consultant on May 24, 2023 at 3:24

Chesapeake always does.  First is CEMI (Chesapeake Energy Marketing Inc.).  Chesapeake's marketing arm takes a cut.  Most HA operators don't have a marketing arm that takes a cut.  Second, each operator has their own separate gathering and treating (G&T) contracts with midstream companies.  One operator on one contract can have a different G&T cost than the operator of the wells across the road with a different contract or a different midstream company.  We're not privy to the details of those contracts unless that information is included in litigation discovery.  If your price differential is only 20 to 40 cents, you're doing better than many Chesapeake lessors.

Permalink Reply by Skip Peel - Mineral Consultant on May 31, 2023 at 8:38

The monthly settlement price for May was $2.117 and for June is $2.181.  The Year To Date average monthly settlement price is $2.759.

Permalink Reply by Skip Peel - Mineral Consultant on June 29, 2023 at 8:41

The monthly settlement price for July is $2.603.  The year to date monthly average is now $2.737.

Permalink Reply by Skip Peel - Mineral Consultant on August 2, 2023 at 2:31

The monthly settlement price for August is $2.492. The year to date monthly average is now $2.707.

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