Natural gas spot price – Review and Analysis
The cold weather in many parts in North America still causes an ongoing surge in natural gas consumption; nevertheless this doesn’t bother traders to downgrade natural gas as its price continues its descent. This might be because traders already look a head for the expected decline in natural gas consumption in the following month, as the harsh weather will subside.
There were reports last week of heavy snow in many parts throughout the US and Canada; e.g. last week in Tulsa, Oklahoma was the snowiest winter ever recorded.
In a nutshell, except for the New York City Gate spot price, which showed some increase early last week, the natural gas spot price Henry Hub and its future price fell all week.
Let’s check out the main figures for this passing week of 7th to 11th of February:
Natural gas spot price (Henry Hub) reached 3.96$/mmbtu at the end of the week – an 8.3% decline from beginning to end of the week. On average, it fell by 2.43% on a daily basis, and the average weekly price was 23% below the average weekly price in the previous week.
The Nymex Henry Hub Future Price (March delivery) also declined last week by 4.6% from beginning to end of the week; and its average price was 23.5% lower than last week’s average price.
Both these prices show the downward trend that was expected to happen during February and as the winter will subside in the US, the price will continue to decline (for more on the February natural gas prices outlook see here).
The backwardation (the spread between the future and spot prices, i.e. future minus spot) for Henry Hub declined during the week as it settled at the end of the week on -0.05$/mmbtu – the smallest spread this month. Nonetheless, the backwardation still might indicate the market is expecting the price of natural gas to decline next month.
This passing week’s average NY gate natural gas spot price fell by 9.2% compare to last week’s average price, however, the cold weather and snowfall during the beginning of the week caused a hike in demand and consequentially the NY city gate price, rose sharply by over 30% on Monday and Tuesday, only to fall the rest of the week resulting in a decline of ~34% from beginning to the end of the week.
Natural gas price chart
The following chart show the changes of natural gas spot price (Henry Hub) and futures price (Nymex Henry Hub) in $/mmbtu for this passing week:
The final graph shows the natural gas spot price (Henry Hub) and futures price (Nymex Henry Hub) daily percent change during last week.
Here are the main highlights of the recent EIA weekly report on natural gas: in my last review on U.S. natural gas storage, there was a drop of in underground natural gas storage (Billion Cubic Feet); according to the recent report for the week of 4th of February, the natural gas storage continued to decline for the twelfth straight week, this time by 8.9%, a fall of over 209 billion cubic feet; this draw is much larger than the 5-year average draw of 159 BcF; furthermore, the natural gas storage is also lower than the five year average by 45 BcF.
Domestic production of dry natural gas declined in the passing week to an average 5.4 Bcf/day, probably due to the freeze-off in the West, Mid-continent, and Gulf of Mexico regions.
In total, natural gas consumption inclined, while natural gas storage and production declined. The prices showed some resistance but in total fell.
For further reading (in this site):
- Natural gas production freeze on cold weather | EIA review, Feb 12
- Natural gas prices outlook for February 2011
- Oil and gas prices outlook– 9 February
Previous issues of weekly report: