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Natural Gas Prices Up 60% But Not High Enough for New Drilling

Average spot natural gas prices at most major trading points increased 40% to 60% during the first half of 2013 compared to the same period in 2012, according to the Energy Information Administration (EIA), as demand for natural gas rose faster than increases in supply. But industry observers believe these prices are still too low to make new drilling feasible in most states.

Price increases were relatively uniform throughout the country, with the exception of New England and New York, where supply constraints caused spot prices to spike when demand peaked this winter. Price differences between Henry Hub and most western trading hubs averaged less than 10 cents per million British thermal units (MMBtu).

Natural gas spot prices at Henry Hub—a key benchmark and major trading location—averaged $3.75/MMBtu during the first half of 2013, up 57% from the $2.39/MMBtu average spot price for the first half of 2012. However, this year-over-year price increase principally reflected the extremely low prices in 2012. Spot prices so far in 2013 are very similar to levels seen in 2009 to 2011.

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