Even though the natural gas market remained soft during most of the 2014/2015 winter, the natural gas market is starting to show some signs of recovery — the price of the Henry Hub has picked up in the past several days and is now hovering over $2.8. Don’t get me wrong, this is still a low price level for this time of the year; the 5-year average price of natural gas for this time of the year is around $3.9. So we still have a long way to go. The Energy Information Administration (opens pdf file) still projects that the annual price of natural gas will be around $3.07 this year and will remain below $4 for the next couple of years. This doesn’t vote well for oil and gas companies such as Chesapeake Energy (CHK) that still heavily rely on natural gas.
The chart below presents the changes in the weekly price of natural gas and underground storage between 2010 and 2015 (up to date).
As you can see, the last time natural gas prices were trading this low was back in the first half of 2012, when tumbled below $2. Back then, however, inventories were way higher and warmer winter conditions kept the demand for natural gas low. So the current conditions, at least from the storage perceptive, don’t warrant for such low prices.
This could suggest that other factors are playing here including low oil and coal prices, along with warmer winter conditions and the expectations for higher than normal buildup in storage in the coming months, just to name a few.
For now, the natural gas market is still soft and could see price remaining below $3 for the near future but at least it has started to rally again.
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