Natural Gas Prices Hit New Low

The September 2009 natural gas contract on the New York Mercantile Exchange (NYMEX) has dipped to below $3.155 per MMBtu.  That low was hit on April 27, 2009.  What makes this decline so interesting is that it is occurring despite several tropical storms in the Atlantic.

“We don’t believe this price decline cares about the tropical storms right now,” says Valerie Wood, President of Energy Solutions, Inc.  “In our publication, The Advisor, we’ve consistently indicated that we felt the energy commodity markets have gotten ahead of themselves and that may be one reason for the price pullback.  Economic data isn’t as rosy as everyone wants it to be.  Crude oil prices have fallen and that is pulling the price of natural gas lower as well.  However, the roll dates of United States Natural Gas Fund, LP (UNG) could also be impacting natural gas prices.”

UNG is an exchange-traded fund that has a heavy focus on the front-month natural gas NYMEX contract, which at this time is September 2009.  On its website, it publishes its roll dates.  Roll dates are defined as the dates on which the futures contract underlying the UNG fund are expected to begin to change from the front-month to the next closest month.  “Basically, this means that UNG specifies the dates under which it is going to begin selling the September 2009 natural gas NYMEX contract and start buying the October 2009 natural gas NYMEX contract,” says Wood.

“The selling of September has helped to move this contract to below $3.155 per MMBtu, but at the same time, the buying of October 2009 has kept that contract about $.40 per MMBtu higher,” says Wood.  “The roll dates for the September 2009 natural gas NYMEX contract are August 13-18, so it will be interesting to see what happens when the roll dates are over.  That will ultimately be the test of determining whether or not UNG’s buying and selling activities may have influenced price activity over the past several days.”

In its latest monthly edition of The Advisor, Wood provides additional insight into long-term natural gas prices and why she feels natural gas buyers should be preparing now for some longer-term purchases.  Request your free copy of the August 2009 edition of The Advisor 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.