Has the rise of the Marcellus shale play caused the Henry Hub to lose its allure as a benchmark for natural gas prices? Forbes reports:
The Henry Hub has historically been considered to be the most liquid trading point in the gas distribution system. And for good reason. The Gulf Coast region has been the nation’s primary natural gas production region. As a result, the Henry Hub price is supposed the best proxy available for the average market price of natural gas in the United States.
Until recently, it almost certainly was.
That has changed with the rise of the Marcellus Shale as a major gas producing region.
In 2010, the Marcellus Shale in Pennsylvania and West Virginia produced less than 2 Bcf/d. In 2013, the region was producing closer more than 15 BCF/d, or about 18% of all natural gas produced in the U.S., according to the U.S. Energy Information Administration.
“How important is the Henry Hub as a price proxy for the Eastern US? My thinking is that, before long, it won’t be very important at all,” Teri Viswanath, director of commodity strategy for natural gas at BNP Paribas in New York, told Reuters in September.
Read the full story here.