Natural gas prices averaged a little more than $2.50 per mmBtu (million British Thermal Units) in 2016. Those days are over. Prices will average at least $3.50 to $4.00 in 2017.
Prices have more than doubled since March 2016 but gas is still under-valued. Supply is tight because demand and exports have grown and shale gas production has declined.
In April of last year, I wrote that natural gas prices should double and they did. Henry Hub spot prices increased 2 1/2 times from $1.49 to $3.70 per mmBtu and NYMEX futures prices doubled from $1.64 to $3.30 per (Figure 1).
Nevertheless, gas prices are still too low. Storage was at record high levels throughout 2016 reaching 4.1 Tcf (Trillion cubic feet) and 84% of working capacity in mid-December. Storage has fallen 1.1 Tcf in the last month to 61% of capacity. That is below the 5-year average (pink, dashed line in Figure 2).