Let’s examine the US natural gas market and the effect the news from Japan and the war in Libya on the Henry Hub natural gas spot price and future price as of March 22nd:
Gas prices March 2011
According to weather forecasts, there some residual thunderstorms accompanied with snowfall in parts of the Northeast, and there is a possibility of heavy snow in parts in the Midwest of the US. These winter-like conditions might partly explain the recent rise in natural gas prices during last week.
Future and spot prices
The premium of the future prices of Henry Hub over the natural gas spot price rose as of yesterday March 21st to reach 0.17$/MMbtu (Contango). Mainly because spot prices rose much more moderately than future prices did.
During the month of March, up to March 21st, spot and future prices of Henry Hub rose by 1.5% and 7.4%, respectively, however the average prices in March are lower than the average prices in February by 5.6% for the Henry Hub spot price and 2.1% for future prices. The recent turmoil in Japan might drive natural gas prices a bit as suggested below.
Allies’ attack in Libya attack update
The war in Libya progresses into its forth day as allied forces keeps on bombing Qaddafi’s warplanes and forces.
Due to the Libyan war, natural gas output keeps on falling: there is an estimated of 16.5 Bcf/d natural gas that wasn’t delivered since February 23rd to Italy – the largest importer of natural gas from Libya.
As of January 2011, Libya has 54.7 Tcf natural gas reserves, the fourth largest in Africa. In 2009, Libya exported 349 Bcf of natural gas to Europe.
Japan’s energy demand
The Nuclear Reactor in Fukushima is still a prime concern in Japan due to instability of the reactors and the high radiations levels in the vicinity of Fukushima.
Due to the tsunami and earthquake attack that followed, Japan reduced its demand for oil imports from Europe as many of its refineries were damaged in the tsunami. This is one reason why there is speculation that Japan will raise its natural gas supply:
There are reports that Japan will get emergency liquefied natural gas from Malaysia’s state-owned oil company Petronas (For more on the considerations about recovery of Japan see here).
In a related report, Japan is to receive additional gas supply from Indonesia to cope with the energy shortage Japan is facing.
Current Natural gas price
US markets currently show moderate rises in natural gas future price:
The Nymex Henry Hub natural gas price, short term futures (April 2011 delivery) is traded at 4.19 USD / MMbtu, a 0.03 USD rise or 0.7%, as of 14.30*.
Natural gas spot price Outlook:
I speculate that natural gas prices might further rise due to cold weather in the Northeast and Midwest of the US and current speculation around Japan’s source of energy; however, as the winter slowly departs Europe and North America, the pressure for natural gas spot price to increase is reduced and as the month will progress we will probably see natural gas prices moderately decline.
Here is a reminder of the top news that are scheduled for today and tomorrow that might after the natural gas markets (all times GMT):
13.30 – Core retails sales Canada (January 2011)
15.30 – EIA report about Crude oil inventories
18.00 – Chairman of Fed – Ben Bernanke’s speech
For further reading (on this site):
- Natural gas prices outlook for March 2011
- Weekly outlook for 21-25 March
- Natural gas market keeps on leveling out | EIA review, Mar 18
- Natural gas prices finished the week with rises – Weekly recap 14-18 March