Natural gas prices outlook– 22 February

Let’s examine the energy markets and the related news that might affect major commodities’ prices such as natural gas spot price in the coming week:

Natural gas analysis

The winter is coming to an end, but there are still many parts in the US in which there are snowfalls and harsh cold weather that are affecting natural gas prices:

As of 09.41 AM GMT, natural gas future price (Henry Hub) moderately inclined by 1.19% or 0.05$/mmbtu to reach 3.92$/mmbtu.

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

Natural gas spot price October- February 22The table shows that natural gas prices have dropped dramatically during February: natural gas spot price Henry Hub declined by 9.4% 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 22

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 last week there was a shift back to Contango.

Natural gas spot price Outlook:

Despite the cold weather last week (after all it’s still winter in many parts in North America), there is an ongoing decline in natural gas prices. According to the recent forecasts, there are expectations of another storm in the Mid-Atlantic to depart on Tuesday morning. The cold front will migrate to the South. These weather forecasts will probably have a short term effect on natural gas prices, and might drive them up a bit, but as we are closer to exit the winter time, the pressures for natural gas prices to rise, continue to decline.

As we are getting closer to the end of the month, the natural gas (Henry Hub) spread between the futures short term and the spot price will continue to close. Nonetheless, the switch from backwardation to contango during February might indicate that investors and traders thought the winter will end sooner than it actually did (the final winter month in North America according to EIA).

Additional Natural gas related news:

AUSTRALIA’S oil and gas producer, Woodside Petroleum, showed a net earning of nearly 7% to $1.57 billion and said it remains bullish about medium term demand for liquefied natural gas.

The Shell Petroleum Company of Nigeria (SPDC) recorded one billion standard cubic feet per day (bscf/d) gas production on February 5, 2011.

China’s natural gas output reached 9.57 billion cubic meters in January 2011, up 12.7% T-2-Y.

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


23.50PM – Report of Japanese Trade balance (for January)


15.30PM – EIA report about Crude oil inventories

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