Natural gas prices didn’t recover from the sharp falls of past months and during December they also declined. Furthermore, during December natural gas prices have unperformed not only compared with recent months’ prices, but also compared with previous years’ price levels. One of the reasons is probably the late arrival of the winter, but it’s only one aspect of the sharp drop in natural gas prices.
What is up ahead for U.S. natural gas prices during the first month of 2012? Let’s analyze the changes in the natural gas prices during December 2011 and provide an outlook for natural gas prices for January 2012:
Natural Gas Prices December 2011- Analysis
First, let’s examine what happened to natural gas prices (Henry Hub) during December: the Henry Hub natural gas spot and future prices declined during most of the month. Even though the Contango (future price premium over spot price) has shrunk during the month compared to previous months, the market remained in Contango. By the end of the month, as the short term futures (January delivery) will expire, the Contango is likely to close, as was the case in November.
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By the end of the month (as of December 27th) the Henry Hub spot price sharply declined by 13.52% and the future price by 12.39%.
Let’s divide December into two parts as in the table below: from 30/11 to 16/12 and from 16/12 to 27/12; during the first part of December, the Henry Hub spot price sharply plummeted by 15.21%, and the same goes to the future price (January delivery) that fell by 11.92%; during the second part of the month, the Henry Hub spot and future prices only moderately changed as the Henry Hub spot price rose by 1.99% and future price declined by 0.54%. The table below summarizes these findings:
The next table shows the average natural gas spot price, future price of Henry Hub (January delivery) and New York City Gate Spot price. During December, the average Henry Hub spot price declined by 1.5% compared with November’s average price. Future prices of Henry Hub (January delivery) also declined by 8.2%.
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