Here is an analysis for the recent changes in natural gas prices and an outlook on its behavior today, February 2nd:
Overview of recent price changes:
Natural gas spot price (Henry Hub) moderately declined yesterday by 0.23%, after it increased on Monday by 3.26%.
The Henry Hub has been declining during January however it is still on average above the average in December.
During the month of January the Henry Hub spot declined during the month of January (from beginning till end) by 2.4%.
The average price during January was 4.49$/mmbtu which was 5.8% above the average price in December 2010. One of the reasons for this increase was the winter time.
The short term Henry Hub future price also fell yesterday by 1.8% to reach 4.34$/mmbtu, after it increased by 2.31% on Monday. In total, the future prices declined by 4.9% during the month of January, however the average price in January increased by 5.1% compare to December.
The Contango as of yesterday (the gap between future and spot) of Henry Hub was 8 cent/mmbtu, however this gap fluctuates on a daily basis and could reverse by the end of the day.
The rise in the average price in January compare to December is partly related to the cold weather: the average temperatures in the US (national) were 32.9 f during December, compare to 29.8 f in January – a 9.3% decline.
Outlook for Today
According to the recent forecasts, the storm in the Northeast will be followed with snow and rainfall, while the Midwest is also experiencing what is now called a “snow day”; thus there is a good chance that the recent decline in natural gas prices will reverse direction and rise today or tomorrow.
Consider that in recent years, there was a strong correlation between natural gas spot price (Henry Hub) and natural gas consumption, and thus the ongoing drop in temperatures could result in a rise in natural gas prices. Note that this correlation, however, isn’t reliable and could fluctuate.
That being said, note that there are expectations that natural gas prices will decline as February will continue (see here).
Here is a reminder of the top news that will be published today and tomorrow that could influence oil and gas prices (all times GMT):
15.30PM: The EIA will issue its weekly report on crude oil inventories
13.30PM: Department of Labor report – US unemployment claims
15.30PM: The EIA will publish its weekly repot on natural gas market.
15.30PM: The ECB Press Conference
18.00PM: Federal Reserve chairman Ben Bernanke speech
For further reading (in this site):