Natural Gas, Market Review – Short-Term Energy Outlook

Onyx Power and Gas Consulting continues a weekly series providing the Short-Term Energy Outlook as of December 12, 2017.  This series of news articles should provide a complete insight on the current conditions of the energy…enjoy, check out archives and come back each week for additional information on how all sorts of energy sources impact our daily lives

Natural Gas

The front-month natural gas futures contract for delivery at Henry Hub settled at $2.76/million British thermal units (MMBtu) on December 7, 2017, a decrease of 13 cents/MMBtu from November 1 (Figure 8). Several factors affected price movements in November. Natural gas inventories fell further below the five-year average in recent weeks until a rare injection into storage for the week ending December 1 brought inventories up to 36 billion cubic feet below the five-year average. Increased takeaway capacity from Appalachia is expected to result in increased natural gas production in the coming months and could limit significant upward price pressure, although colder-than-normal temperatures throughout the rest of 2017 could contribute to price increases. The Henry Hub natural gas spot price averaged $3.01/MMBtu in November, almost 14 cents/MMBtu higher than in October. EIA expects that price to average $3.13/MMBtu in December and average $3.12/MMBtu in 2018.

Figure 8: U.S. natural gas front-month futures prices and storage

Natural gas futures prices in November traded within a 43 cents/MMBtu range, wider than in recent months, but they stayed close to $3.00/MMBtu. In comparison, natural gas futures prices in October traded within a 31 cents/MMBtu range, the narrowest range for October since 1995. Natural gas front-month implied volatility increased 2.3 percentage points since November 1, settling at 39% on December 7 (Figure 9). After reaching a three-year low in August 2017, volatility has been steadily increasing, as is typical heading into winter, but it remains below the volatility levels seen in November 2015 and 2016. In November 2016, liquefied natural gas gross exports were more than 1 billion cubic feet per day (Bcf/d) for the first time in U.S. history, as Sabine Pass entered service, and storage reached an all-time high of more than 4 trillion cubic feet, factors that may have contributed to higher volatility. Natural gas production has shown year-on-year growth since June 2017, and inventories are within 1% of the five-year average level, which may moderate implied volatility.

Figure 9: Natural gas implied volatility

The professional consultants at Onyx Power & Gas Consulting are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing. Volatility in the energy markets makes it too precarious to take chances. Partner with Onyx Power & Gas in Making Energy Make a Difference!

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