Natural Gas Prices Outlook – November 21-25

The natural gas prices sharply declined during last week and reached the lowest prices in 2011; as the winter is entering very slowly to the U.S. the market expectations are still to see natural gas prices rising in the weeks to come.

Let’s see what is up ahead for natural gas prices during the upcoming week of November 21st to November 25th:

Natural Gas Prices November 2011 – Update

On Friday, November 18th natural gas Henry Hub future price (December delivery) sharply declined by 3.21% to $3.32/MMbtu – the lowest price level since October 28th, 2010; Henry Hub natural gas spot price also sharply fell by 3.21% to $3.02/MMbtu – the lowest price since November 16th, 2009; during November Henry Hub  future price decreased by 17.49% and natural gas spot price by 15.52%.

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

Natural gas spot price future (Henry Hub) November 2011 November 21

Rainfalls and Snow in the U.S.

According to the recent weather forecasts there are rainfalls and snow in West and there are expected rainfalls in the Northeast. There might be stormy weather in the South. The current climate is still not severe winter to pressure much natural gas prices to rise.

 Future and Spot Prices

The natural gas market is still in contango (the premium of Henry Hub future over spot prices); the Henry Hub future price reached $0.30 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 in the upcoming weeks. The chart below shows the changes in contango for the Henry Hub prices during November (until November 18th).


Contango  Backwardation Natural gas (Henry Hub) Future-Spot  November 2011 November 21

Natural Gas Storage – Still Rising  

The underground natural gas storage (Billion Cubic Feet) inclined last week by 0.5% or by 19 Bcf to 3,850 billion cubic feet for all lower 48 states; the current natural gas storage is 6.2% above the 5-year average, and is 0.4% above the storage level during the same week in 2010. The recent injection was the smallest for this season.

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.

Due to Thanksgiving the new report will be published only in two weeks but an update on the storage and prices will be published on Thursday, November 24th.

The chart below shows 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 18

Current Natural Gas Prices (November 21st)

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

The Nymex Henry Hub natural gas price, short term futures (December 2011 delivery) is traded at $3.31 / MMbtu, a 0.12% decrease, as of 10:18*.

(* GMT)

Natural Gas Prices Outlook:

Natural gas prices continued to fall during last week and may continue to decline as the winter is slowly entering the U.S. The recent decline in crude oil prices may also affect natural gas to trade down.

I speculate the current natural gas prices will continue to decline mainly, but as the weather will get colder in the weeks to come the demand for natural gas will tend to rise and may curb the ongoing decline in natural gas prices.  

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