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January 7, 2021

Regional Natural Gas Pricing in Q4 2020 Saw a Rocky Road

By Jeff Bolyard, Vice President, Commodity Strategy

Last year was a roller coaster for most of us and I, like most in my circles, am glad to be turning the calendar to another year. Economic start-ups and shutdowns combined with wild weather and overall uncertainty of supply and demand in 2020 and beyond has provided the gas market with unstable fundamental drivers which has translated into extreme price moves, especially in the spot market. This volatility is even more evident at the regional level, where specific supply and demand factors exacerbate the daily price of natural gas.

The chart below compares three common regional daily indices; Chicago City Gate (Orange), SoCal Gas City Gate (Blue) and Transco Zone 5 Del (Green), against the U.S. benchmark of Henry Hub, LA (Black).


  • Southern California Gas City Gate has shown the most extreme swings after severe weather and wildfires flamed the price of natural gas since early August when prices peaked at $13.25/MMBtu. Since August 1, SoCal Gas CG has averaged a $1.66/MMBtu premium to the Henry Hub.
  • Transco Z5, a mid-Atlantic coast proxy, is also showing some notable price movements, particularly on cold weather days, supporting evidence of a supply short region during peak demand periods.
  • Meanwhile, Chicago, a traditional premium market in the winter prior to infrastructure improvements that now provide access to Appalachian supplies, has averaged an $0.11/Dth discount to Henry Hub in 2020.
  • Even the Henry Hub, which had low cost and little change for the first nine months of the year, has had 40 days since September 1st in which the price has moved more than $0.10 from the previous day.

This acute change in pricing, not only at the Hub but even more so at the regional level, places more risk on all entities that are buyers of this commodity. These topics should be discussed with your energy advisor to see if a change in purchase strategy is desired for the locations in which plant assets reside.

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