Natural Gas Prices Weaken for Fourth Straight Day

The November 2009 natural gas NYMEX contract price has now fallen for four straight trading sessions. With expiration looming tomorrow, it is difficult to say if the price weakness will continue. Physical cash prices also saw some dramatic price plunges yesterday.  As the November 2009 natural gas NYMEX price fell $.27 per MMBtu, cash prices throughout much of the nation fell between $.25 and $.45 per MMBtu. Some of the price weakness seems to be due to moderating temperatures, but a reduction in short positions by speculators also seems to be fueling the decline.

Right now, however, Mother Nature is in control.  With winter ahead, any sort of colder temperatures are going to cause price strength in both the cash market and the NYMEX market.  As El Niño conditions have weakened, winter weather forecasts have become more mixed.  Some call for extreme cold in the Northeast and Mid-Atlantic, while others say the jet stream is going to keep the cold confined to the Midwest.  “While the longer-term forecasts are still a little up in the air, near-term it appears that November could start out colder than normal,” says Valerie Wood, President of Energy Solutions, Inc.  "If November forecasts hold true, the price weakness of today may only be temporary."

“There is also going to be some interesting price dynamics in the market on Wednesday and Thursday of this week,” says Wood.  “On Wednesday, the November 2009 natural gas NYMEX contract will expire.  On Thursday, the December 2009 natural gas NYMEX contract will become the front-month contract.  Right now, November is trading at a $.70 per MMBtu discount to December.  Thus, when Thursday rolls around, there is likely to be a large discrepancy between physical prices and NYMEX prices, just as there was at the start of November following the October expiration.”