News / Business
Price Rally in Natural Gas May Be a Sign of Things to Come
The recent 10-minute price rally in natural gas overshadowed the bearish fundamentals reminding buyers that logic doesn't always prevail.
Despite very bearish fundamentals, it seems like the bulls have been in control of crude oil and natural gas prices so far this month. Since July 29, 2009, the September 2009 crude oil NYMEX price has managed to gain close to $10 per barrel, even though crude oil stocks are at 24-year highs. Similarly, the September 2009 natural gas NYMEX price has rallied as well. But, what was so interesting about the rally in natural gas is how it occurred. On Monday, August 3, 2009, between 9:00 a.m. and 9:10 a.m. EST, the September 2009 natural gas NYMEX contract rallied from $3.708 per MMBtu to $4.162 per MMBtu. This is a dramatic price move without an underlying shift in fundamentals. So, what does this mean?
“The recent rally in natural gas prices is a subtle reminder that commodity markets don’t have to follow logic. With storage at record levels, no tropical storm activity, moderate weather, and depressed demand, the fundamentals for natural gas prices are very bearish. However, the price move on Monday wasn’t about the fundamentals,” says Valerie Wood, President of Energy Solutions, Inc. “Rather, it was likely about someone with a lot of positions who decided to either get into the market or get out of the market. We don’t know why they made that decision, nor do we know who it is – but their actions moved prices very quickly.”
There is more and more talk about increased regulation of speculators who invest into commodity prices. The Commodity Futures Trading Commission is actively holding hearings to further explore whether or not to set position limits on energy commodities. “There’s always been talk,” says Wood. “But, this time it seems more serious than in the past. As a result, speculators may start making moves to avoid being impacted by changing regulations and this means the price move on Monday, may not be an isolated incident.”
Energy Solutions’ most recent natural gas pricing outlook is also highlighted in its most recent Weekly Edition of The Advisor, a multi-faceted publication that keeps natural gas buyers up-to-date with market-changing events. Request your copy of the August 6, 2009, weekly edition by sending your request to request@energysolutionsinc.com or call (608) 848-9589.
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About Energy Solutions, Inc.
Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 25 years of experience in the natural gas industry, our team focuses on natural gas prices and in helping businesses improve their internal processes for the purchase of natural gas.
