Natural gas price outlook – 18 January

The recent snow in the Northeast of the U.S. from last week has subsided, however it’s still cold, e.g. in New York temperatures predicted to reach as low as 16 f (-9 c) on Friday with a chance for snow fall. As the temperatures will continue to fall, the demand for heating will increase, and thus the consumption of natural gas in the U.S. and Europe will continue to be high.

Despite the rise in consumption and fall in storage of natural gas, the Henry Hub price fell last week by 1.34%, while the Henry Hub futures price rose by 1.82%; the Henry Hub price was last traded at 4.43$/mmbtu.

Nymex Henry Hub Future (Natural Gas price) is currently traded at 4.54 USD/ MMBTU (one million BTU), an increase of 0.06 USD/ MMBTU, or 1.23%, as of 9.29 PM GMT.

This could mean that the market estimates future price of natural gas higher (even after considering the contango) than it is worth now, i.e. there are expectations for natural gas to rise in the near future as the winter will progress and natural gas storages will dwindle.

Also consider that  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.

If I would to speculate, I think that we will probably continue seeing a decrease in natural gas spot price (Henry Hub) as the week will progress, as it did last week, however there could be some moderate rises today based on speculations and the near expiry of natural gas February futures.

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