Henry Hub spot price continues to drop as it declined yesterday by 0.99%, while natural gas future prices bounced back yesterday and rose by 1.73% – its first price hike for April. As a result the contango reached 0.09$/Mmbtu. Will this downwards trend of natural gas prices continue?
Let’s examine the natural gas market for April 12th:
The rising importance of Shale Gas
In a recent analysis report by EIA, it’s shown that Shale gas will have a very important role in the energy market is the years to come. The currently recoverable estimated shale gas resources are 6,622 trillion cubic feet among 33 countries, including the US. As a comparison, the current worldwide proven natural gas reserves are 6,609 Tcf (as of January 2010), and there are additional 16,000 Tcf natural gas resources, which are technically recoverable, excluding shale gas, of course.
This means that shale gas has the potential to increase the total recoverable natural gas resources by over 40%.
The US is among the world’s leading countries in number of shale gas resources that are recoverable with an estimate of 862 Tcf. The leading country is China with 1,275 Tcf.
This shows how shale gas might shift the balance of power in the energy market, as China and U.S. will continue to increase their consumption of natural gas over oil in industry and residential sectors.
Natural gas prices April 2011 – update
The weather forecasts predict there will be a few thunder storms accompanied with rainfalls in pars of the Northeast, which might raise a the consumption of natural gas; while the temperatures are predicted to reach 40s to 70s in the Northeast; in the South there are expected strong winds and high temperatures reaching 60s to lower 70s.
It seems that winter is reluctant to leave the US… this might explain the rise in natural gas prices during the second half of March as seen in the chart below:
Future and spot prices
The contango (the premium of Henry Hub future over spot prices) reached yesterday, April 11th 0.09$/MMbtu. As we are exiting the winter and there are expectations that during May natural gas demand will diminish, the current contango may switch back to backwardation during the month.
During April 2011, up to April 11th, Henry Hub spot and future prices declined by 6.9% and 5.8%, respectively.
Current Natural gas price
Natural gas future price is currently traded at moderate falls in European market:
The Nymex Henry Hub natural gas price, short term futures (May 2011 delivery) is traded at 4.09 USD / MMbtu, a 0.02 USD decrease or 0.54%, as of 13.08*.
Natural gas spot price Outlook:
I still speculate that natural gas spot prices will continue to decline as the week will progress; natural gas spot price will also outperform future price, as it did for most of April so far.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13.30 –Canadian Trade balance
13.30 – Report on American Trade balance
15.30 – EIA report about Crude oil inventories
For further reading (on this site):
- Natural gas prices outlook for April 2011
- Weekly outlook for April 11-15
- Natural gas prices kept on freefalling most of the week – 4-8 April