4 min read

How Today’s Hurricanes Impact Natural Gas Prices

By 5 on September 24, 2020

Once upon a time, major hurricanes in the Gulf of Mexico had the potential to wreak havoc on natural gas markets and send prices soaring to levels that are 4X what they are today. Late last month, as Hurricane Laura was heading toward major gas production centers, many were asking if gas prices would turn bullish and increase because of the impact to natural gas supplies. If this were 2005, the answer would have been a definitive “yes.” But today, the correlation of natural gas prices and hurricanes in the Gulf of Mexico is not what it was fifteen or even ten years ago. There are several reasons for this change.

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Topics: Markets Natural Gas
3 min read

Natural Gas Tea Leaves

By 5 on August 27, 2020

Tasseography is a fancy word for fortune-telling by reading tea leaves. Humans often search for patterns in hopes of predicting the future just as we do with financial markets. While serious investors would never resort to reading tea leaves, technical traders and fundamental analysts look for patterns and trends to better understand and anticipate market movement.

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Topics: Markets Natural Gas
3 min read

The Good News Bears vs. The Bad News Bulls

By 5 on July 30, 2020

The past 12 months have been a wild ride for natural gas producers. Going into last winter, storage was near the 5-year average. And while prices were not great, they were at least near most producer’s costs and most natural gas producers were focused on how to continue to increase production. Recently, those ideas have dramatically changed. A mild winter put significant downward pressure on prices as production was strong, demand was moderate and storage inventory levels were high.

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Topics: Markets Natural Gas
2 min read

A Crude Awakening Pushes Down Gas Prices

By 5 on June 24, 2020

The US Energy Information Administration (EIA) and many in the energy industry were predicting a significant decrease in natural gas production through the rest of this year and into the first quarter of 2021. Some of this forecasted production decline was due to very low spot and short-term market prices for natural gas. Another significant driver of this expectation was the anticipated decline in gas coming from large crude oil reserves, such as the Permian Basin. However, the recent recovery of crude oil prices has changed this outlook.

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Topics: Markets Natural Gas
3 min read

Crude is Up and Gas is Down (A Little)

By 5 on May 28, 2020

Last month, we reported that while short-term crude prices were near 20-year lows, natural gas futures prices for the year 2021 were reaching 24-month highs. The rally in natural gas prices in 2021 was primarily driven by the fear that a slowdown in crude oil production from reserves, such as the Permian Basin, would produce less natural gas, which is a by-product of the crude oil extraction process. 

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Topics: Markets Natural Gas
3 min read

Why is Natural Gas not Following Crude Oil into the Basement?

By 5 on April 22, 2020

The market price for oil has been consistently bearish since global oil demand destruction conversations began in early March.  On Monday, April 20th, that outlook manifested itself into a day that oil traders will never forget. Crude oil opened trading on Sunday evening at approximately $17 per barrel and by mid-morning, it had dropped to $10 per barrel. By mid-day, it was trading just above zero, and then it broke through into negative territory in the afternoon.  Crude oil settled for the day at -$37.63, up just a few dollars from the daily low of -$40.32 per barrel.

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Topics: Markets Natural Gas
3 min read

Saudi Arabia and COVID-19 Pushing Down Gas Prices

By 5 on March 19, 2020

On Sunday, March 8th, the NYMEX natural gas market opened at approximately $1.67/MMBtu. By the early morning hours of Marh 9th, it dropped down to almost $1.60 and ended the day up about 9¢, at $1.78/MMBtu.  On Tuesday, March 10th, natural gas again rallied another 16¢ to close around $1.94/MMBtu.  By Wednesday morning, the rally continued up to about $2.00/MMBtu before news around COVID-19 began to take hold, moving the market down.  These market movements are shown below in Figure 1 (note that the height of the line shows the day’s range between the minimum and maximum trade prices, the height of the bar is that day’s difference between opening and closing prices, and the color of the bar indicates if the day closed up (green) or down (red) compared to the open).

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Topics: Markets Natural Gas
1 min read

Williams Cancels Constitution Gas Pipeline Project

By 5 on February 26, 2020

Last week, Williams Company and its partners announced that they have cancelled plans for the construction of the Constitution Pipeline.  This new 124-mile natural gas pipeline, shown in Figure 1,  would bring 650 Dth of gas per day from the Marcellus Shale to the Southern Tier of New York State.  While public opposition to this project was strong, recent favorable legal and regulatory developments suggested that the construction of the pipeline would proceed as planned.  However, Williams stated the economics of this project have recently changed in a way that there would not be a strong enough return on the company’s investment.  The unfavorable economics associated with the pipeline project are driven by a bearish natural gas market. 

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Topics: Markets Natural Gas
3 min read

The Bad News Bears for Gas Producers

By 5 on December 18, 2019

It is hard to believe that natural gas traders and analysts remain bearish given current prices. But the amount of gas being produced is outpacing demand and continues to place downward pressure on prices.  This supply and demand imbalance has caused both short and long-term gas prices to tumble.   Prices for both the January 2020 contract and winter strip (Jan 2020 – Mar 2020) have dramatically fallen over the last month.   Figure 1 shows how gas prices for the January contract rallied through the fall, reaching its peak of $2.94/MMbtu on November 5th and then settled at $2.22/MMBtu on December 9th – a decrease of nearly 25% in four weeks.   Prices for the winter strip have followed a similar trend.   Figure 2 shows longer-term market movements in gas futures since November.  The blue bar in Figure 2 is the price for the January 2020 gas contract and calendar years 2020 through 2024 on November 5th.  The black bar shows how those same contracts were trading on December 13th.   While the biggest decrease was in the January contract and in calendar year 2020, prices fell across all calendar years to 2024.

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Topics: Markets Natural Gas
2 min read

A Correction in Natural Gas Basis Prices

By 5 on November 21, 2019

Natural Gas basis prices for the winter of 2019/2020 have decreased by 28% since the middle of October.  Figure 1 shows how the basis price for this winter started to rally in August, reaching its peak of $2.90/MMbtu on October 16th.  Most believe that the strong rally was due to the TETCO natural gas pipeline explosion on August 1st near Danville, Kentucky.  In the wake of that accident, the amount of natural gas moving through that pipeline was reduced by 15%.   The reduction in gas volumes along this major interstate pipeline, which supplies the Northeast, had a bullish impact on basis prices for this winter, which rallied through September and early October.

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Topics: Markets Natural Gas