Natural gas price outlook – 12 January

The cold weather in the Northeast of the U.S. continues as there is currently snowfall in New York. This harsh weather is expected to subside tomorrow, but could come back during the weekend. This could explain the ongoing increase in natural gas spot price (NY gate price).

As expected, natural gas spot price (NY gate) after rising on Monday by over 18%, it rose yesterday by over 8%. In total, this commodity price has increased by over 44% from the beginning of the month up to yesterday.

As the cold weather in the Northeast will continue today, it will probably continue driving NY gate prices higher.

Consider also that in the UK this winter was very harsh – the coldest December since 1890 (Charles Dickens times…).

Consequentially, according to the Guardian, the natural gas storage in the UK is at its lowest level in over five years, with enough gas in storage to meet merely five and a half days of consumption in normal winter temperatures. This factor could drive natural gas prices in the UK.

Natural gas spot price (Henry Hub) continues to decline, as it did most of last week. Yesterday, it fell by a 0.45%. For the entire month, up to yesterday, the price fell by nearly 3%.

Finally, notice that the contango – the difference between the future prices and spot prices for the Henry Hub – has declined in this passing month: the average contango (Nymex Henry Hub Future Price (February futures) minus natural gas spot price (Henry Hub)) is 0.01 $/MMBTU up to yesterday for the month of January; while for the parallel dates during December (January futures) the average contango was 0.03 $/MMBTU. This could indicate the decline in the market estimates for natural gas future prices.

If I would to speculate, I think that we will probably continue seeing an increase in natural gas spot price (NY gate). While the Henry Hub price will probably continue its downward trend as the week will progress.

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