Natural Gas Prices - April 13
Posted: Wed Apr 13, 2016 10:00 am
On NYMEX the December natural gas futures contract closed at $2.80/MMbtu on 4/12. I believe the U.S. natural gas market is going to be 4 to 6 Bcf per day tighter by Christmas. The steep increase in futures contracts for Q1 2017 indicate that speculators see the same thing. - Dan
Natural gas prices rebounded sharply on Tuesday with the May contract posting a gain of $0.092/MMBtu on the day. The prompt contract’s close at $2.004 was just under the 100-day moving average of $2.018, and it was the 12th consecutive close above the 40-day moving average. The May contract’s close also marked the second day this month above $2.00, and after-hour trades were seen as high as $2.03. The balance of 2016 lagged the front, but still showed a strong day over day gain at +$0.069. The remaining calendar 2016 strip closed the day at $2.30, which is $0.03 below the recent peak set on March 30th.
The move higher on Tuesday was consistent throughout the trading day, with pre-market trades as high as $1.95. After the open of the regular session, the natural gas curve steadily moved higher and, shortly before the close, the prompt contract gapped up $0.03 to push above the $2.00 threshold.
Calendars 2017-2020 were also higher on the day, but to a much lesser extent than the front of the curve. Calendar 2017 closed at $2.82 or +$0.03, Calendar 2018 closed at $2.897 or +$0.015, Calendar 2019 closed $2.96 or +$0.01, and Calendar 2020 was flat on the day at $3.07.
The fundamental focus for today is a highlight on the recent trend in LNG prices. The collapse in global LNG prices this winter is undeniable. Recent Gulf Coast to Asia netbacks have been seen inside of $0.25/MMBtu, and spreads to Europe have been inside of $1.00. However, the weakness in netbacks should be considered in the context of recent winter weather, or lack thereof. If one were to map the weather anomaly in the northern hemisphere between December 2015 and February 2016, it would be clear why LNG prices have been weak. This period was the warmest in history for the northern hemisphere, with records dating back to 1880. Other than North America, there is very limited global gas storage, and thus there is nowhere to send the LNG when demand falls below available supply. Unlike domestic natural gas markets and global crude markets, there is not an available storage arbitrage opportunity when spot pricing becomes weak. Global gas demand is still steadily climbing, and, barring every subsequent winter demonstrating record warm temperatures, LNG pricing will likely improve. In addition, global LNG prices are still predominantly linked to Brent crude, and any improvement in that market will also lift overall LNG prices.
Expectations for Thursday’s weekly natural gas storage report are in the -9 Bcf to +9 Bcf range according to the Bloomberg survey. The median is an estimate of -1, lower than the early expectations from late last week at +3. These expectations compare to the same week last year at +63 and the 5-yr average of +22.
Natural gas prices rebounded sharply on Tuesday with the May contract posting a gain of $0.092/MMBtu on the day. The prompt contract’s close at $2.004 was just under the 100-day moving average of $2.018, and it was the 12th consecutive close above the 40-day moving average. The May contract’s close also marked the second day this month above $2.00, and after-hour trades were seen as high as $2.03. The balance of 2016 lagged the front, but still showed a strong day over day gain at +$0.069. The remaining calendar 2016 strip closed the day at $2.30, which is $0.03 below the recent peak set on March 30th.
The move higher on Tuesday was consistent throughout the trading day, with pre-market trades as high as $1.95. After the open of the regular session, the natural gas curve steadily moved higher and, shortly before the close, the prompt contract gapped up $0.03 to push above the $2.00 threshold.
Calendars 2017-2020 were also higher on the day, but to a much lesser extent than the front of the curve. Calendar 2017 closed at $2.82 or +$0.03, Calendar 2018 closed at $2.897 or +$0.015, Calendar 2019 closed $2.96 or +$0.01, and Calendar 2020 was flat on the day at $3.07.
The fundamental focus for today is a highlight on the recent trend in LNG prices. The collapse in global LNG prices this winter is undeniable. Recent Gulf Coast to Asia netbacks have been seen inside of $0.25/MMBtu, and spreads to Europe have been inside of $1.00. However, the weakness in netbacks should be considered in the context of recent winter weather, or lack thereof. If one were to map the weather anomaly in the northern hemisphere between December 2015 and February 2016, it would be clear why LNG prices have been weak. This period was the warmest in history for the northern hemisphere, with records dating back to 1880. Other than North America, there is very limited global gas storage, and thus there is nowhere to send the LNG when demand falls below available supply. Unlike domestic natural gas markets and global crude markets, there is not an available storage arbitrage opportunity when spot pricing becomes weak. Global gas demand is still steadily climbing, and, barring every subsequent winter demonstrating record warm temperatures, LNG pricing will likely improve. In addition, global LNG prices are still predominantly linked to Brent crude, and any improvement in that market will also lift overall LNG prices.
Expectations for Thursday’s weekly natural gas storage report are in the -9 Bcf to +9 Bcf range according to the Bloomberg survey. The median is an estimate of -1, lower than the early expectations from late last week at +3. These expectations compare to the same week last year at +63 and the 5-yr average of +22.