Stay up to date on the latest information and changes that may impact natural gas and electricity pricing with the Market Commentary.
Last week demonstrated precisely why the NYMEX is a futures market. While much of the country was experiencing near record breaking cold, with high temperatures in the negatives and unfathomable wind chills, the prompt month natural gas contract dropped more than 44 cents, or 14%, throughout the week.
The prompt month, February 2019 contact, reduced in value on 4 of 5 trading days last week. The biggest change came on Monday as the prompt month shed 26.7 cents on the heels of warmer weather forecasts in the 6-10 and 11-15 day ranges.
Tuesday was expiration day for the February contract. While the prompt month traded lower throughout the day, it ran up towards the end of trading to settle at $2.950. This expiration price was nearly 70 cents lower than both the January 2019 and February 2018 expiration prices. It also marked the lowest expiration since September 2018, which settled at $2.895.
With March 2019 assuming the prompt month position, it fell under downward pressure immediately. Newer weather forecasts are calling for normal to above normal temperatures throughout much of the Midwest and Northeast. With the new forecasts in mind, the market is essentially assuming that winter 2018-2019 is over.
While storage levels are just 14 BCF behind last year, many view this as a bearish signal. The reason is twofold. First, daily production levels are higher than one year ago. Second, current weather forecasts suggest less usage through February and March in comparison to those same months last year.
Power prices continue to track natural gas fairly closely. While the 12 month strip for natural gas shed 5.6% last week, per usual, New England prices were more volatile and gained 5.3% in unison with natural gas.
The above comments regarding the NYMEX futures market are for illustration purposes only and the sole opinion of the author and not IGS Energy, its officers or its employees. Neither the author nor IGS Energy shall be liable for any information contained herein. This communication is no way intended to provide guidance or recommendations as to the value of or advisability of trading in any contract of sale of a commodity for future delivery, security futures product, or swap.
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