The U.S. natural gas market is the largest in the world, yet it is cut off from the rest of the world (except for Canada). We have very limited import or export capacity. That will change in a couple years, but for now it is the case.
That is why, over the last twenty years the U.S. has seen four major price spikes for domestic gas. BTW these price spikes happened just months after all the "experts" said we had plenty of gas.
Although we have an extensive pipeline system in this county, there are still sub-markets where gas sells for much higher and lower prices than the NYMEX front month contract you see quoted in the news. The physical market and the futures market are very different for gas.
Read this: http://seekingalpha.com/article/2001471 ... urce=yahoo
Note that spot prices at Henry Hub (the largest sub-market) topped $9/mcf today and Houston Ship Channel hit $11/mcf. The NYMEX Natural Gas Futures are based on trading at the Henry Hub. Yet those futures have yet to rise to $6 per mcf and are currently closer to $5 per mcf. The reason is most investors believe the couple of days of cold that caused fierce price competition will abate and that prices will fall back. But if storage falls under 1 trillion cubic feet that same fierce price competition for physical delivery of natural gas could erupt to make sure storage facilities are adequately filled to handle next winters demand.
If February stays cold (and it is very cold in Houston today), then this could get very interesting.
The U.S. natural gas market
The U.S. natural gas market
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group