Natural Gas Passed the $4.4 Mark – Will it Halt?

The price of natural gas jumped again during the passing week to its highest level in months: The price spiked above the $4.4 mark, but it did change course on Friday and sharply declined. According to the latest weekly EIA update, the storage extraction was 81Bcf. This week’s extraction was much higher than last year’s rate but close to the five year average. The recent rally of natural gas might slowdown due to the weather developments in the US. 

The Nymex Henry Hub Future (short term delivery) jumped again by 5.76% and reached by Friday $4.35/mmbtu – its highest price since July 2011; its average daily change was 1.14%; its weekly average rate was 6.92% above last week’s average rate.

The gap between the NG future and spot prices – future minus spot – shifted from Backwardation to Contango during last week.

Natural Gas Charts

The following charts show the shifts in Nat-gas future (Nymex Henry Hub) in $/mmbtu during December 9-13.

Natural Gas price  chart -December 9-13  2013As you can see in the chart above, the natural gas price (Henry Hub future rate) sharply rose until the end of the week.


In the second chart are the daily percent shifts of the Nymex Henry Hub future (short term delivery).

Natural Gas chart - percent change December 9-13 2013 

The underground natural gas storage (Billion Cubic Feet) declined again for the fourth time this season during last week by 2.24% or by 81 Bcf; the storage reached 3,533 billion cubic feet for all lower 48 states; the current storage is 3% below the 5-year average and is also 7.2% below the storage during the same week in 2012. The recent extraction was slightly higher than the five year average: During the same week in December 2012 the natural gas injection was 2 Bcf, and the five year average extraction from storage for the same week of December was 79 Bcf. This week’s extraction was mostly due to the eastern consuming region, in which the extraction was 46 Bcf.

Weather and natural gas

The current outlooks are that the temperatures will remain lower than normal levels mainly in the Northeast but will reach higher than normal temperatures in the South East and the West Coast. Considering the expected low temperatures for the season, the demand for natural gas in the residential/commercial sector in the Northeast is likely to remain elevated in the near future. But the normal or above normal temperatures in other regions could curb down the recent rise in prices. Moreover, the heating degrees days are estimated to be higher than normal and last year’s. These factors could also keep the natural gas prices rising.

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