Natural gas prices naturally fell – Weekly recap 14-18 February

The extreme cold weather mainly in the Northeast of the States has subsided and despite the ongoing cold weather in many parts of the US, the consumption for natural gas has declined and consequentially the prices also declined. As traders look ahead for the upcoming month of March, their expectations are for consumption of natural gas to further drop along with natural gas prices.

In a nutshell, New York City Gate spot price, along with natural gas spot price Henry Hub and its future price fell during recent week.

Let’s check out the main figures for this passing week of 14th to 18th of February:

Natural gas spot price – Review and Analysis

Natural gas spot price (Henry Hub) reached 3.85$/mmbtu at the end of the week – a 1.03% decline from beginning to end of the week. On average, it fell by 0.56% on a daily basis, and the average weekly price was 6.6% below the average weekly price in the previous week. This small fall during the week shows that the big fall came at the beginning of the week compare to last week.

The Nymex Henry Hub Future Price (March delivery) also declined last week by 1.27% from beginning to end of the week; and its average price was 2.3% lower than last week’s average price.

Both these prices show the downward trend that was expected to happen during February and as the winter will continue to subside in the US and mainly the extreme cold weather (which is more important in affecting natural gas consumption), the price will continue to decline (for more on the February natural gas prices outlook see here).

The Contango (the spread between the future and spot prices, i.e. future minus spot) for Henry Hub was very steady for most of the week as it settled at the end of the week on 0.03$/mmbtu – the smallest spread this month. Nonetheless, the Contango is very small and might still indicate the market is expecting the price of natural gas to decline next month.

This passing week’s average NY gate natural gas spot price fell by 37.2% compare to last week’s average price, and its price fell by 6.32% from beginning to end of the week. If New York won’t experience any further snow storms this winter, we will probably continue seeing a downward trend in this commodity’s price.

table natural gas spot price - 14-18 February* This figure is calculated based on the percent change from the price at the beginning of the week compare to the price at the end of the week

Natural gas price chart

The following chart show the changes of natural gas spot price (Henry Hub) and futures price (Nymex Henry Hub) in $/mmbtu for this passing week:

natural gas price chart - 14-18  February

The final graph shows the natural gas spot price (Henry Hub) and futures price (Nymex Henry Hub) daily percent change during last week.

natural gas price chart - percent change 14-18  FebruaryNatural gas storage, consumption and production – highlights:

Here are the main highlights of the recent EIA weekly report on natural gas: in my last review on U.S. natural gas storage, there was a drop of in underground natural gas storage (Billion Cubic Feet); according to the recent report for the week of 11th of February, the natural gas storage continued to decline for the thirtieth straight week, this time by 10.9%, a fall of over 233 billion cubic feet; this draw is much larger than the 5-year average draw of 150 BcF; furthermore, the natural gas storage is also lower than the five year average by 6.3% BcF.

As the extreme cold weather subsided there was a fall in natural gas consumption in many regions in the U.S.: the average daily consumption in the US dropped by 17.1% compare to the previous week, reaching 82.1 Bcf; combined consumption for both residential and industrial sectors declined by 23.2% reaching 40.2 Bcf per day.

In total, natural gas storage, consumption and production declined. The prices showed some resistance but in total fell.

For further reading (in this site):

Previous issues of weekly report:

4 comments for “Natural gas prices naturally fell – Weekly recap 14-18 February

  1. Matt
    February 22, 2011 at 11:49 am

    all these figures are showing a drop off in supplies from 5 year average and yet the spot price decreases??

    how long will producers keep drilling wells and actually put them into production???

    with the current gas price it is uneconomical to drill for gas, as many large shale fields currently have high depletion rates and Canadian imports decreasing, is it not possible for an eventual unexpected drop off in production.

    things cant go on as they are at the moment for much longer, gas prices will need to be higher.

  2. admin
    February 22, 2011 at 12:50 pm

    Hi Matt,
    Thanks for your comment.

    Notice that we are nearing the end of the winter and NG prices were much lower this year than last year during the same time. This might be because of the use of natural gas storage, and not purchasing imported NG from Canada (but that’s my guess).

    There is the seasonality effect (even though it’s not reliable…) and as we exist the winter, the prices of NG will likely continue to drop.

    I think what most people are looking at in the US is the plethora of NG found in 2009-2010. If the price of drilling will be very high (compare to importing NG from Canada) then there will be a cause from the supply point of view for a rise in prices in next winter.

    From the demand side, since oil is very volatile (see how the news from the Middle East affecting the oil price) and more expensive than NG (compare to a few years back), perhaps the consumption for NG rise in the US as the year will progress, especially as in any state of the union the current and former presidents of the US talked about stopping being dependent on foreign oil.

    • Matt
      February 22, 2011 at 1:45 pm

      admin, is it possible for people/investors/the market to be so short sighted.

      yes, there were big finds, but it wont come to market at such ludicrous prices.

      currently these finds are reserves and reserves only.

      with fewer wells coming on line ( perhaps being shut in ) sooner rather than later the production rates wont stake up with forecasts. storage levels will not increase as forecast. storage and production levels could ebb and flow in the future until a happy medium is reached, in this case at least a price of $6-7/ mmbtu, this could take decades to play out.

      i understand seasonal volatility but during the past few months there was hardly any volatility for the increased winter usage and increased volatility on the suggestion of some warmer weather in the future?

      only my personal thoughts but this is putting producers in a position where their focus will increasingly shift to liquid rich plays, obviously there will be associated gas from these wells, but not to the extent of gas rich wells.

      notice BHP Billiton bought 487,000 Fayetteville net acres from Chesapeake today for $4.75 billion cash. this has increased BHPs reserves by over 10tcf and has an expected life of 40years.

      couple of things, BHP rarely make bad decisions, they will expect to profit from this, this is almost a bet for higher prices in the future and it will take 40 years to extract!

      reserves are great but will be conserved with current gas prices, my view only!

      re stopping being reliant on oil, Pickens has the right idea, and its well and good for current and former presidents to TALK of being less dependent on foriegn oil, but from everything i have ever seen from over here in Australia, Americans can be stubborn.

      power companies will possibly switch to gas fired generators before there is a major fundamental shift in vehicles powered by natural gas, this will possibly be accelerated by increases in coal costs, but for the time being the status quo will stay roughly the same.

      perhaps current volatility in the oil market due to issues in the middle east will see a few major truck fleets consider NG, perhaps a few car owners will switch to NG but not fast enough or by big enough numbers to relieve oil dependance.

      regarding my interest on this topic, i own shares in an Australian listed company producing/exploring in Oklahoma so have researched this comprehensively.

  3. admin
    February 22, 2011 at 10:21 pm

    Hi Matt,

    Well you are sure making a compelling and interesting point for NG to rise in the near future…and yes, I agree that changes in the US could take time, especially when it comes to switching from oil to NG.

    And as I said before, my previous suggestions that NG will fall in the near future is speculation, and it could be that in the next few months I will have to eat my hat…the only thing I would like to add to this discussion from my end, is that during Nov 2010 (these are the latest figures in EIA) the total consumption was 1,974 Bmcf in the US – the highest level in the last 9 years for that month (and 12.1% above Nov09), and yet the price of NG was only 1.4% higher in Nov10 compare to Nov09 (similar to the inflation rate in the US). There are ways to contradict the following, but at face value it seems that price pressure for NG to rise is falling. These are my two cents on this subject

    Thanks again for your comments and thoughts,


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