Natural gas prices outlook– 17 February

Let’s examine the energy markets and the related news that might affect major commodities’ prices such as natural gas spot price for today, February 17th:

Natural gas analysis

Yesterday, natural gas spot price moderately inclined by 0.26% to reach 3.93$/mmbtu; On the other hand, the NY city gate price moderately declined yesterday by 1.17%.

Let’s examine the average prices of natural gas prices in the last several months:

Natural gas spot price October- February 16

The table shows that natural gas prices have dropped dramatically during February: natural gas spot price Henry Hub declined by 8.3% in February compare to January.

Also note that when comparing the average prices, the gap between Henry Hub future and spot prices have also increased – as the average future price (March delivery) is lower than the spot price during February.

Natural gas spot price future (Henry Hub) Contango Backwardation January - February 16

The graph above shows the changes in the gap between future-spot of Henry Hub prices during January and February 2011.

At the beginning of February the Henry Hub showed backwardation (Future cheaper than spot) while in the last three days there was a shift back to Contango.  This could mean that the market is reexamining the pricing of natural gas and expects its price to rise in March.

Natural gas spot price Outlook:

After last week’s storms in the Northeast, the main weather news shift to the West: according to the recent forecasts, there are expected rainfalls in central California.  Most likely that such news will not affect the consumption of natural gas, and therefore will not pressure natural gas spot price to rise.

Despite that recent rise in Henry Hub spot, we will probably continue seeing a downward trend in natural gas prices both for spot and futures. Nevertheless, there will probably continue to be some “hiccups” along the way.

Also note, as showed above, the spread between the future and spot prices will probably continue to show future prices to be lower than spot prices as we will reach March, despite the recent Contango (the final winter month in North America according to EIA).

The most notable report to be published today is the EIA natural gas storage report that will probably show an ongoing fall in natural gas storage and a rise in consumption. See here my last review on last week’s EIA report on natural gas.

Here is a reminder of the top news that will be published today that might influence oil and gas prices (all times GMT):

On the news today (GMT):

13.30PM – Department of Labor report – US unemployment claims

15.30PM – EIA report about Natural gas storage

19.00PM – Report on American Federal budget balance

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