In January, 2024, WTI crude averaged $74.15 and was relatively flat month-over-month with a 3% gain over the December average of $71.90. We are still -7% from the trailing 6 month average of $80.03, and -4% from the trailing 12 month average of 77.31. Overall, crude pricing has been relatively stable in the range of $70-80 per barrel. US production growth is finally flat-lining following historic gains made in 2023.
While we saw a month-over-month improvement in Henry Hub natural gas pricing, from $2.52 in December to $3.18 in January due to the polar vortex which brought bitter cold temperatures to much of the US in January, prices have since cratered to levels not seen since this COVID pandemic in 2020. As of this morning, February 19, natural gas is trading at $1.55/mmbtu…
According to the EIA, record-high natural gas production has outpaced growth in natural gas consumption, leading to the supply glut we are now experiencing. The EIA estimates that U.S. dry natural gas production averaged a record-high 104 billion cubic feet per day (Bcf/d) in 2023, 4% higher than the 2022 annual average. Production increased in the Permian region, driven by improved well-level productivity and higher crude oil prices in 2023, as well as in the Haynesville region and the Appalachia region.
Is there any end in sight? Operators are finally starting to respond to low pricing by dropping rigs in dry gas plays across the country. However, it is going to take some time to work through record high inventories. Here’s to praying for a hot summer!
Until next time…
Steven Hatcher