The shift in natural gas prices’ direction last week as they fell sharply after increases during the second half of April, might be a short term occurrence. The Henry Hub, much like all other major commodities, was affected by the strengthening of the US dollar that weakened major commodities’ prices. Let’s see what is up ahead for natural gas prices during this week updated to today, May 9th:
Natural gas prices May 2011 – update
The weather forecasts predict winter like weather in the west of the US with cooler than average temperatures. In the Northeast there maybe a few showers but the regions will experience seasonal temperatures.
The natural gas prices seem to have made a “u turn” at the beginning of the month of May: following the rise in natural gas prices during the second half of April, natural gas prices shifted direction again and started off May with 6% falls for Henry Hub spot price and 9.75% for future prices.
Future and spot prices
The contango (the premium of Henry Hub future over spot prices) reached on Friday, May 6th to nil, i.e. spot prices were equal to the future price. As seen in the chart below, during the last couple of months, natural gas was usually in contango, which might indicate that the market expected natural gas prices to rise in the following months as I have explained in my May outlook report.
During last week, however, there seem to have been a shift as the contango switched to backwardation. If this occurrence will continue, it might indicate that the market thinks that natural gas prices might decline in the following month.
Natural gas in the news
- Two north stream gas pipelines are completed to pump gas from Russia to Germany;
- During last week, the number of natural gas rigs rose by eight to 890 rigs in the United States;
- The worldwide demand for natural gas is on the rise, according to Tom Fowler.
Current Natural gas price
Natural gas future price is currently traded at moderate rises in U.S. market:
The Nymex Henry Hub natural gas price, short term futures (June 2011 delivery) is traded at 4.26 USD / MMbtu, a 0.02 USD increase or 0.47%, as of 12.44*.
Natural gas spot price Outlook:
As I have stated in the May outlook report, natural gas prices will continue to be high for the season. The downfall in natural gas prices was a reaction that occurred in major commodities due to the strengthening of the US dollar.
Current natural gas prices show moderate rises, as do most of the other major commodities’ prices. It will remain to be seen if there will be any additional macro events that will cause to shift the natural gas prices from their upward course they have experienced during April. I speculate that natural gas spot price will slowly incline during the week.
For further reading (on this site):
- Weekly outlook for May 9-13
- Natural gas prices closed the week with falls – weekly recap 2-6 May
- Natural gas prices outlook for May 2011
- Natural gas storage rose for fourth week | EIA review, May 6