Warmer Temperatures Yield Lower Natural Gas Prices
Moderate temperatures this week boosted an already favorable supply situation, leading to widespread declines in natural gas spot prices in the Lower 48 States.
For the week (December 13-20), the price for next-day delivery at the Henry Hub decreased 78 cents per MMBtu, or 10.8% to $6.43 per MMBtu. The NYMEX futures contract for January delivery at the Henry Hub settled yesterday (December 20) at $6.769 per MMBtu (1,000 British thermal units), which was 90 cents less than last Wednesday’s price.
Natural gas in storage decreased to 3,167 Bcf as of December 15, leaving inventories at 9.5% above the 5-year average. The spot price for West Texas Intermediate (WTI) crude oil moved up $1.74 per barrel or about 2.8% since last Wednesday to $63.08 per barrel or $10.88 per MMBtu.
The exceptions to the general price trend could be found only at Rockies trading locations, as a winter storm enveloped the region and colder-than-normal temperatures have increased heating demand. As a result of the cold weather in the Rockies, the price at the Opal, Wyoming trading increased 18 cents per MMBtu, or 3.8% to $4.87.
Since Wednesday, December 13, price declines were steepest at locations in the Gulf Coast region and in the Northeast, where prices fell up to 92 cents per MMBtu. Before gaining 17 cents per MMBtu in trading on December 20, the Henry Hub average price dipped as low as $6.26 on Tuesday. This was the lowest daily average price since mid-October, a signal that weather during this winter peak demand season has not influenced buyers and sellers strongly to date.
In the Northeast, where temperatures were in the upper 50s, the price for natural gas off Transcontinental Pipeline in New York City on the week decreased 77 cents per MMBtu to $7.07. Declines at most other market locations in the California, Texas, Midwest, and Midcontinent regions in the same period were somewhat less pronounced. At the PG&E citygate in California, the spot price declined 55 cents per MMBtu, or 7.3%. With these declines, spot prices are now about half last year’s hurricane-induced historically high prices.