Natural gas price outlook – 11 January

The snowfall is coming back to the northeast of the U.S. which could explain the recent rise in the natural gas spot price (NY gate price). There is a decline in gas rigs and the ongoing downward trend of Henry Hub will probably continue today. Let’s elaborate on these items:

Snow in New York

There are reports all around that the snow in New York is progressing and some estimate that the snowfall could reach as high as 14 inches. As we all know, this could have a very strong effect on natural gas spot price (NY gate) and will drive prices high, especially if the cold weather will continue to progress this week. Yesterday, we have already seen a big rise in this commodity price: NY city gate natural gas spot price rose by over 18%. In total, this commodity price has risen by over 33% from the beginning of the month up to yesterday.

Natural gas and Oil rigs in the U.S.

According to Bloomberg, the number of natural gas rigs in the U.S. has decreased by five, reaching 914 this week – the lowest level since February, while the oil rigs in the U.S. increased by 12, reaching 777 – the highest level since 1987.

As the number of rigs will continue to decline it could have some adverse effects on natural gas supply, however, since currently this energy commodity is abundant in the U.S. as presented in the recent EIA report on natural gas storage, this news shouldn’t have much of an effect on natural gas spot price.

If I would to speculate, I think that we should probably continue seeing a big rise (which will probably follow very shortly with a big fall) in natural gas spot price (NY gate). In regards to the Henry Hub, its price will probably continue its downward fall as the week will progress, despite the cold weather which could have a short positive effect on it – an effect that wouldn’t last long.

For further reading:

Oil: The Other Gold