News / Business
Quick Price Move Could Signal a Trend Change in Natural Gas Prices
Natural gas prices rebounded last week on nothing more than a lower-than-expected storage report, providing the market with a brutal reminder of how unpredictable this market can be.
On Thursday of last week, the May 2010 natural gas NYMEX contract rebounded by more than $.25 per MMBtu after the Energy Information Administration (EIA) announced that 12 Bcf had been injected into storage for the week ending March 26, 2010. The price move was noteworthy as it took place in less than five minutes. The price move took many by surprise because the week before, an 11 Bcf injection pulled natural gas prices to below $4 per MMBtu. However, the most recent EIA report had a completely opposite impact.
“The market was overdue for a corrective price rebound,” says Valerie Wood, President of Energy Solutions, Inc. “First, major price support at $3.82 per MMBtu held last week, and second, the timing of the seasonal second quarter rally is here.”
Over the past month, Energy Solutions, Inc. has been warning buyers of the potential of a rally that could take natural gas prices back to the $5-$6 per MMBtu range. “Robust shale supplies and bearish fundamentals argue against such a price rebound,” says Wood. “However, fundamentals can be overshadowed by other factors, such as seasonality, and seasonality indicates that natural gas prices tend to rally by around 50 percent in the second quarter.”
“Plus, buyers who were unwilling to buy at $4 per MMBtu, tend to be the ones to push the market higher as they panic buy on the way up. An increase in buying leads to an increase in upward price momentum,” says Wood.
In its recently published Natural Gas Price Outlook, Energy Solutions, Inc. identifies numerous factors that will impact natural gas prices over the next two years, and then elaborates on the critical issues that buyers and sellers need to consider in order to achieve or improve profitability. This analysis is straight forward, and it will help buyers and sellers develop a comprehensive strategy for the upcoming years.
Learn more by visiting www.naturalgasoutlook.com.
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About Energy Solutions, Inc.
Formed in 1996, Energy Solutions, Inc. is independently owned. With more than 50 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.
