Natural Gas Prices Outlook – November 14-18

The natural gas prices sharply declined on Friday; natural gas prices struggle to rise above their initial price level from the beginning of the month. There are many news items on the agenda that may affect the natural gas market.   

Let’s see what is up ahead for natural gas prices during the upcoming week of November 14th to November 18th:

Natural Gas Prices November 2011 – Update

On Friday, November 7th natural gas Henry Hub future price (December delivery) declined by 1.81% to $3.58/MMbtu – the lowest price level since October 18th; Henry Hub natural gas spot price sharply fell by 5.75% to $3.28/MMbtu; during November Henry Hub  future price decreased by 8.91% and natural gas spot price by 10.38%.

The chart below shows the development of Henry Hub spot and future (December delivery) prices during November.


Natural gas spot price future (Henry Hub) November 2011 November 14

Stormier Weather is Up Ahead

According to the current weather forecasts there are storms and rainfalls up ahead in the next few days mainly in the East and the South. According to the forecast, the rainfalls will hit the Northeast region including New York. This news may start to pressure natural gas prices to rise as the week will progress.

Future and Spot Prices

The natural gas market continues to be in contango (the premium of Henry Hub future over spot prices); even after the natural gas spot price sharply inclined on November 9th, the future price was still $0.10 higher.   If the natural gas market will remain in contango, it means that the market still expects natural gas prices to rise in the months to come. Since the U.S. is entering the winter, this sentiment makes sense. The chart below shows the changes in contango for the Henry Hub prices during November (until November 14th).


Contango  Backwardation Natural gas (Henry Hub) Future-Spot  November 2011 November 14

Natural Gas Storage – Keeps Stocking Up

The underground natural gas storage (Billion Cubic Feet) inclined for the thirty-first straight week; last week by 1.0% or by 37 Bcf – the most modest increase since August 5th, which could mean a slowdown in the level of injections; the natural gas storage reached 3,831 billion cubic feet for all lower 48 states – the highest stock level since November 19th, 2010; the current natural gas storage is 5.9% above the 5-year average, but is still 0.2% below the storage level during the same week in 2010.

As long as the natural gas storage keeps rising, this may indicate the natural gas market in the U.S. remains loose and could keep natural gas prices low.

The new report will be published on Thursday, November 17th.

The chart below presents the natural gas storage (weekly figures) and Henry Hub natural gas prices during 2010 and 2011.

natural gas prices chart 2011 (Henry Hub Natural Gas storage 2011 November 14

On This Week’s Agenda:

Tuesday: U.S. Retail Sales: in last month’s report regarding September, the retail sales, when controlling for the price changes, slightly inclined; gasoline stations sales increased by 1.2% in September; this report could indicate the changes in U.S demand for gasoline (see here my review of the recent report).

Tuesday: U.S. Producer Price Index: This monthly report will show the progress in the PPI during October, i.e. the inflation rate from producers’ stand point. In the recent report regarding September, this index for finished goods rose by 0.8% compared with August’s rate and by 6.9% in annual terms;

Wednesday: U.S Consumer Price Index: During September, the CPI inclined by 0.3% and over the last 12 months by 3.9%. The core CPI inclined by 0.1%; this news could indicate the changes in the U.S energy market.

Thursday: U.S. Housing Starts and Building Permits: in the recent report, the adjusted annual rate of housing starts reached 658,000 in September – a 15% increase from August , while the building permits slipped by 5%. If the upcoming report will be positive it may also affect natural gas prices (see here the recent review);

Thursday: Philly Fed Manufacturing Index: This survey provides an indicator for the economic progress of the US economy as it measures the manufacturing conditions of the US. In the October the index inclined from -17.5 in September to +8.7 in October. This index, may affect natural gas prices (see here last report).

Current Natural Gas Prices (November 15th)

Natural gas future price is currently traded down in U.S. commodities market:

The Nymex Henry Hub natural gas price, short term futures (December 2011 delivery) is traded at $3.41 / MMbtu, a $0.4/ MMbtu decrease or 1.27%, as of 21:15*.

(* GMT)

Natural Gas Prices Outlook:

Natural gas prices may continue to dwindle during the beginning of the week, but as the weather will get colder, mainly in the East Coast it is likely to start pressure natural gas prices to rise. The high crude oil prices may also affect natural gas price to increase. On the other hand, the modest decline in consumption during last week in natural gas may have helped bring down natural gas prices in recent days. If the upcoming reports including the Philly Fed will be positive, they may also positively affect the major commodities prices that may also pressure natural gas prices to increase. 

I speculate that current natural gas prices might further moderately decline mainly at the beginning of the week, but as the weather will start to get colder the natural gas prices are likely to follow and start rising during the second half of the week.  

For further reading:

Monthly Reports

Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.