Winter Jitters Continue to Support Natural Gas Prices

Recent price strength in natural gas NYMEX prices now puts the front-month once again within reach of the $5 per MMBtu level.  This level will be attained even easier if crude oil prices continue to move higher.  The strength in crude oil prices has been remarkable especially since inventories continue to be well above the norm.  However, crude oil isn't moving on fundamentals of supply and demand.  Rather, it is being driven higher by ongoing weakness in the U.S. dollar.  At this point, it appears that other economies are going to rebound from the economic recession faster than the U.S.  This is causing the U.S. dollar to continue to weaken against other currencies.  Weakness in the U.S. dollar causes investors to shy away from the greenback and instead put their monies into commodities, namely crude oil and gold.

While crude oil may be being driven by weakness in the dollar, the strength is probably inhibiting the ability of natural gas to fall lower.  Another factor playing into the strength of natural gas prices are forecasts for the upcoming winter.  There seems to be an increase in forecasts calling for below normal temperatures in the eastern part of the nation this winter.  “While this is providing price support right now, the reality is that there should me more than sufficient storage inventories to meet demand this winter,” says Valerie Wood, President of Energy Solutions, Inc.  “Every year at this time, the market becomes "jittery" about supply availability for the upcoming winter.  However, once into winter, reality usually starts to offset these jitters.”   

“Eventually, fear and reality collide … and reality will win,” says Wood.  “We believe reality is going to show that with weaker demand because of the recession, natural gas supplies will be more than sufficient for the winter.  In the end this will cause any price support that exists for natural gas to weaken.” 

In its most recent edition of The Advisor, Wood emphasizes that while prices have strengthened, natural gas buyers need to start to prepare for the first quarter decline.  Learn more about this anticipated buying opportunity in the October edition of The Advisor, a publication of Energy Solutions, Inc. Request your complimentary copy by sending your request to request-oct-pr20@energysolutionsinc.com or call (608) 848-9859.

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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.