Let’s examine the current natural gas market in the US and the effect the recent news might have on natural gas spot price (Henry Hub) and future price as of March 9th:
The premium of the future prices of Henry Hub over the natural gas spot price fell, and as of yesterday, March 8th the spread was 0.04$/MMbtu (Contango) – the smallest gap this week.
According to recent forecasts, severe thunderstorms accompanied with heavy rainfalls and flooding have struck the Southeast as they have extended from to the Gulf coast. There are also reports of snow in some parts of the US like Pennsylvania in the Northeast and Ohio Valley in the Mid West.
This storm might increase the natural gas consumption in those regions, which might suggest why the gap between the natural gas spot price and future price has closed very dramatically yesterday.
The US consumption of natural gas is still high compare to previous years (why not, natural gas is cheap?!), and the natural gas stocks continue to dwindle, and yet there is little evidence (so far) since February that natural gas price will start to hike…
Tomorrow the EIA will publish its weekly report on the natural gas supply, and there are speculations that the report will show a decline of 78 bcf in natural gas storage (in the previous week the report showed a fall of 85 bcf).
Current Natural gas price
Europe markets currently show moderate falls in natural gas future prices:
The Nymex Henry Hub natural gas price, short term futures (April 2011 delivery) is traded at 3.85 USD / MMbtu, a 0.02 USD fall or -0.39%, as of 13.35 PM*.
(* GMT)
Natural gas spot price Outlook:
As the cold weather will continue to dwell in many parts of the US, it will probably pressure natural gas spot price to rise. This affect, however, won’t be long lasting as the winter is slowly departing the US, and with it the prices of natural gas will likely to continue to decline.
The oil prices are still high due to the turmoil in the Middle East, causing many to consider alternatives such as natural gas for heating purposes, thus the hike in oil prices might also cause some spillover effect on natural gas spot price.
Since natural gas, however, isn’t a perfect substitute (obviously not for fueling cars), this scenario is something to consider but not to rely on.
Here is a reminder of the top news that will be published today that might influence the markets (all times GMT):
Today:
Tentative – China’s foreign trade balance
12.30PM – Australian Bureau of Stat. will publish the unemployment rate
15.30PM – EIA report about Crude oil inventories
Tomorrow:
7.30AM – German Trade Balance report
13.30PM – Department of Labor report – US unemployment claims
13.30PM – Report on American Trade balance
13.30PM – Report on Canadian Trade balance
15.30PM – EIA report about Natural gas storage
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