The natural gas changed direction and slightly declined during last week. United States Natural Gas (UNG) also slipped last week. According to the recent U.S Energy Information Administration weekly report, last week’s natural gas withdrawal was well above the five year average but lower than last year’s withdrawal. What is next for natural gas? Let’s examine the recent changes in the natural gas market.
During the previous week, the price of Henry Hub (short term delivery) slipped by 1%. Moreover, United States Natural Gas also decreased by 1.2%. As of last week, the Henry Hub price also $0.47 per million BTUs higher than its price during the same week in 2013. Last week’s modest decline in the price of natural gas may have contributed to the slight recovery of shares of some natural gas companies including Cheniere Energy (LNG): During last week, Cheniere Energy’s stock inched down by 0.1%.
The chart below presents the developments in the prices of natural gas and UNG in past several months. Prices are normalized to November 29th, 2013. The chart shows that UNG has out-performed natural gas by roughly 16.7 percentage points due to the Backwardation in the futures market. This current situation suggests the market expectations are that the price of natural gas may drop in the coming months.
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