The combination of many things, such as warm temperatures, high gas production, large storage and short positions by speculators—has reduced natural gas prices to near 10-year lows this week as we approach winter. The NYMEX November 2015 natural gas futures contract recently dropped to a low of $1.948/MMBtu, the lowest price on a prompt month since April 2012.
This is only 4 cents above the 10-year low price of $1.902/MMBtu set on April 20, 2012 and illustrates a 22 percent decrease in gas prices in less than a week. Continued warm weather in the first half of November, combined with additional storage injections, could continue to push down NYMEX prices in the short term until colder weather increases heating demand.
Gas Storage at Record Highs
NYMEX fundamentals have been pushing prices lower. Gas storage is at a record level due to warmer than normal temperatures in the Eastern half of the nation. It is 12% above last year’s levels and 4% above the 5-year average. NOAA is forecasting a continued warm winter.
Natural Gas Production is High
Production has remained high, despite dropping prices.
Wall Street Speculation
Bearish bets by banks and hedge funds have also had their impact on prices. These bets could change at any time, though. If weather becomes colder than expected, market prices could spike quickly.
How to Benefit from Present Prices
Understand that prices likely will not stay this way. Consider taking advantage of the current market to reduce your price volatility for the coming years, for both electricity and natural gas.
- Lock in prices for longer terms
- For larger users, use hedge portions of your volume each month, similar to dollar cost averaging
Contact Better Cost Control to control your company’s energy costs.