The natural gas market always swings to extremes. Following last year's enormously bearish winter, the market tested precisely where natural gas producers felt the most pain, and it succeeded in testing that lower bound.
Editor’s Note: We updated the chart with Henry Hub as a 3-month leading indicator.
At $2.25/MMBtu, Lower 48 gas production saw meaningful volumes being shut-in. Natural gas producers announced voluntary production curtailment in Q1 2024. This was followed by a brief and premature rally in the natural gas market that quickly saw production return to ~103 Bcf/d only to falter again as Henry Hub retested $2/MMBtu.
The spike in production followed by the drop was evidence that the market succeeded in figuring out the lower band.
For this year, the market will want to figure out just where that upper band is. As we will explain in the fundamental section of the report, natural gas balances will be tight enough to warrant market participants to repeatedly "buy the dip", and it will be crucial for the market to first figure out what price point will incentivize more production. And the longer it takes for production to respond, the more prices will move higher.
It's not your normal natural gas market this year.