Natural Gas Prices

Overview:  Thursday, July 20, 2007

Natural gas spot prices decreased across the board since July 11 in almost all states.  Prices at the Henry Hub came down 41 cents per MMBtu, about 6%, since July 11, to $6.24 per MMBtu. 

At the NYMEX, the futures contract for August natural gas delivery at the Henry Hub settled on July 18 at a price of $6.528 per MMBtu, falling 7 cents per MMBtu, about 1% since July 11. 

Natural gas in storage was 2,692 Bcf on July 13, which is 16% above the 5-year average (2002-2006).  The spot price for West Texas Intermediate (WTI) crude oil gained $2.45 per barrel on the week to $75.03 per barrel or $12.94 per MMBtu.

In Texas Electricity rates followed with electric prices down to as low as .075 cents per kilowatt hour in some areas of the state.

Natural gas shows at being right at $6.5 MMBtu for today as it came down low in the morning and spiked up this afternoon. This has caused electricity prices to follow right along. We saw electricity prices come way down this morning and then spike up some in the afternoon.

Natural Gas Prices compared to Electricity Prices:

Take a look at the commercial electricity prices (per megawatt hour) this morning while natural gas was at its low at $6.27 MMBtu:

Now look at the adjustment this afternoon when natural gas reached $6.55 MMBtu, almost a 5% increase in the natural gas spot price:

As you can see a 5% increase in natural gas caused electricity prices to increase by about a point.

Now as we look at the trend of Natural Gas since February we see a direction trending downward. We can’t be sure how much longer the downtrend will last but in the face of very hot weather for the summer months we could start to see it begin to break before long. Until then signing up on a natural gas contract or electricity contract for an extended term looks like a smart decision.

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The Henry Hub Spot Price of $6.15 per MMBtu on Friday (July 6) was at its lowest price since January of this year. This was followed by 3 consecutive price increases causing the report week to show a net increase making the week look quite bad as far as a natural gas price spike goes. So even though Natural gas spiked we still see what is the lowest price in natural gas in months.

The Henry Hub price on July 11 2007 was $6.65 per MMBtu, or 36 cents more than last weeks. As of today the price is at $6.34 per MMBtu keeping natural gas at very low levels. The weather is hot hot hot in Texas and the air conditioners are roaring but the natural gas and electricity prices are looking pretty good!

Although price decreases characterized much of the springtime, there are  factors that could lead to rising prices this summer. Being only 3 weeks into the official summer season, plenty of time remains for episodes of hot temperatures in the next few months.  Competing petroleum products (as evidenced by an increase in the underlying crude oil price) continue to trade at near-record prices. We also have hurricane season to deal with although so far we don’t see anything too serious in our wake.