Natural gas demand shows flattening forward curve

Natural Gas Report
By Casey Whelan | April 16, 2013

April 1— Throughout much of the nation, winter has lingered much longer than normal and, from my perspective, much longer than it should! Since natural gas demand is highly correlated with winter heating degree days, it should come as no surprise that the U.S. has experienced robust demand through the first quarter and into the second quarter of the year. Natural gas prices have responded. The current NYMEX price (March 29)  for the May natural gas contract is $4.025 per MMBtu, which is 100 percent higher than the contract low price set last April ($1.97 per MMBtu) for last May's contract.  Natural prices moved up throughout the summer and into the fall. The October NYMEX settlement price was $3.02 per MMBtu, 50 percent higher than last April's prices but 25 percent below current prices.  In spite of dramatic increases in prompt prices over the past year, deferred prices have remained relatively steady.  

The accompanying chart shows the January 2016 NYMEX natural gas contract price from late 2011 until the present. Last April the January 2016 contract price was $4.30 per MMBtu. By October, the January 2016 contract price increased by 12 percent to $4.80 per MMBtu. Interestingly, the January 2016 contract price has actually dropped since October by 4 percent from $4.80 per MMBtu to $4.60 per MMBtu. The January 2016 contract price from last April to March 29, only increased by 7 percent even though the prompt price increased by over 100 percent.  The forward curve has certainly flattened.