Natural Gas Prices Outlook – November 28- December 2

The natural gas prices continued to fall during last week and reached the lowest prices in 2011; the winter has yet to enter the U.S. resulting in low pressure on natural gas prices to rise.


Let’s see what is up ahead for natural gas prices during the upcoming week of November 28th to December 2nd:

Natural Gas Prices November 2011 – Update


On Friday, November 25th natural gas Henry Hub future price (December delivery) rose by 2.31% to $3.2.64/MMbtu – the highest price level since November 11th; Henry Hub natural gas spot price wasn’t traded on Friday and so it remained at $2.83/MMbtu – the lowest price since November 16th, 2009; during November Henry Hub future price fell by 9.92% and natural gas spot price by 22.68%.

The chart below demonstrates the development of Henry Hub spot and future (December delivery) prices during November.


Natural gas spot price future (Henry Hub) November 2011 November 28

Rainfalls and Snow in the U.S.

According to the recent weather forecasts there are expected rainfalls and snow in South and Northeast, but the weather isn’t expected to be significantly colder than recent weeks. This means the demand for natural gas in the U.S. for heating purposes has yet to incline and consequently there isn’t enough pressure to trade up natural gas.

Future and Spot Prices

The natural gas market reached new high levels of contango for this year (the premium of Henry Hub future over spot prices); the Henry Hub future price reached $0.71 premium over spot price by Friday. If the natural gas market will remain in contango, it means that the market expects natural gas prices to incline during December. The chart below shows the changes in contango for the Henry Hub prices during November (until November 25th).

Contango  Backwardation Natural gas (Henry Hub) Future-Spot  November 2011 November 28

Natural Gas Storage – Inclined by a Slower Pace  

The underground natural gas storage (Billion Cubic Feet) slightly inclined last week by 9 Bcf to 3,852 billion cubic feet for all lower 48 states – the highest stock level since 1993; the current natural gas storage is 6.4% above the 5-year average, and is 0.6% above the storage level during the same week in 2010. The modest injection from last week might be an indication that in the weeks to come the recent streak of injections will end.  Since the production levels were still robust, this slowdown in injections might be stem by an increase in demand for natural gas.

Nonetheless, as long as the natural gas storage keeps rising, this may indicate the natural gas market in the U.S. remains loose and could keep natural gas prices low.

The new report will be published on Thursday, December 1st.

The chart below presents the natural gas storage (weekly figures) and Henry Hub natural gas prices during 2010 and 2011.

natural gas prices chart 2011 (Henry Hub Natural Gas storage 2011 November 24

Current Natural Gas Prices (November 28th)

Natural gas future price is currently traded slightly up in U.S. commodities market:

The Nymex Henry Hub natural gas price, short term futures (December 2011 delivery) is traded at $3.55 / MMbtu, a 0.08% increase, as of 06:41*.

(* GMT)

Natural Gas Prices Outlook:

Natural gas spot price decliend during last week as the cold weather hasn’t entered the U.S. yet. The decline in crude oil prices during recent weeks may also keep natural gas prices low.

I speculate the current natural gas prices will change direction rise  and close the high gap between future and spot prices; nevertheless the natural gas future price is likely to remain in a high level Contango. If the weather will get colder in the days to come the demand for natural gas will tend to rise and may help further pushthe decline in natural gas spot price.  

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Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.