News / Business
Natural Gas Price Rally Should Result in Lower Prices in 2010
Natural gas prices have rallied on colder weather, but the rally is giving producers an opportunity to hedge their sale price, which will keep production levels higher.
Current weather outlooks indicate that frigid temperatures are likely to linger into next week, and that means natural gas price strength may linger as well. The bitter cold helped the February 2010 natural gas NYMEX contract rally $.30 per MMBtu yesterday. Of course, crude oil prices also assisted in the rally as the front-month neared $82 per barrel.
“The colder weather is going to take a toll on storage inventories, but it should help to provide a clearer picture of exactly how much demand is out there,” says Valerie Wood, President of Energy Solutions, Inc. “In recent weeks, analyst estimates of storage withdrawals have been unusually inaccurate and that is leading to a lot of price volatility on Thursday’s following the release of the weekly storage report.”
No doubt, price rallies make natural gas buyers very nervous. However, Wood points out that this rally will result in lower natural gas prices in 2010. “This recent price rally has given producers the opportunity to consider hedging the sale price of some additional production in 2010. If the selling price of natural gas is hedged, the producer is insulated from falling natural gas prices, and therefore, they are willing to keep production on-line even during weaker price conditions. Higher production levels ultimately result in lower natural gas prices.”
Learn more about natural gas price direction in the January edition of The Advisor, a newsletter specifically written for businesses as an educational tool and guide about the natural gas industry and price trends. The Advisor keeps companies alert and aware of ever-changing conditions and costs associated with natural gas to help them make intelligent gas purchasing decisions. The Advisor is written by Valerie Wood, President of Energy Solutions, Inc., a company that specializes in helping manufacturing and service companies of all sizes more cost effectively purchase their natural gas supplies. Request a complimentary copy of the January edition of The Advisor by sending an e-mail to request-pr@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.
