During the past 12 months (July 2021–June 2022), the monthly average Henry Hub natural gas spot price, which is a U.S. benchmark, nearly doubled, according to data from Refinitiv Eikon. The price rose from $3.84 per million British thermal units (MMBtu) in July 2021 to $7.70/MMBtu in June 2022. The average inflation-adjusted (real) monthly Henry Hub spot price reached a 12-month high of $8.17/MMBtu in May 2022, the highest price since November 2008. Prices have generally increased since mid-2021 because demand growth has outpaced domestic production growth, keeping inventory levels low.

In July 2021, high demand for natural gas for electricity generation combined with high levels of U.S. natural gas exports led to below-average inventory builds and relatively high prices. By December 2021, mild weather meant less space-heating demand, which allowed natural gas inventories to build back to the five-year (2016–20) average level and brought prices back down. The Henry Hub spot price averaged $5.51/MMBtu in October and fell to average $3.76/MMBtu by the end of the year.

Several factors have contributed to the rising natural gas prices in the United States:

• In the first quarter of 2022 (January–March), colder-than-normal temperatures resulted in total natural gas consumption exceeding the five-year (2017–21) average.

• The electric power sector had limitations with natural gas-to-coal switching.

• Growth in economies in Asia and constraints on liquefied natural gas (LNG) exports to Europe from Russia have contributed to strong international demand for natural gas, resulting in increased U.S. LNG exports.

U.S. LNG exports have been using almost all available natural gas capacity for the past few years. Because of increased domestic and global demand for natural gas, the United States entered the injection season in April with the lowest natural gas storage level in three years.

The Henry Hub spot price increased each month in the first half of 2022 as domestic consumption and exports grew. Increases in natural gas demand outpaced increases in U.S. dry natural gas production over this period. In our June Short-Term Energy Outlook, we estimate that 95.0 billion cubic feet per day (Bcf/d) of dry natural gas was produced during the first half of 2022, down just slightly from the last half of 2021.

On June 8, 2022, a fire and subsequent outage at the Freeport LNG export terminal reduced natural gas demand. The export terminal's shutdown reduced U.S. export capacity by an estimated 2.0 Bcf/d, which made the supply originally intended for export available for domestic consumption. This sudden increase in supply decreased natural gas prices by about 40% through July 4. The Henry Hub monthly average spot price fell from $8.14/MMBtu in May to $7.70/MMBtu in June. The Freeport LNG terminal will likely resume partial operations in October 2022.