Natural Gas – Electricity

I believe we have finally hit a high point for awhile in natural gas pricing. As you can see from the attached charts we hit $4.805 on the current contract Thursday (4/24) before the Natural Gas Storage Report came out.

This week’s report was in line with the analyst’s projections so pricing has gradually started to come down, closing today (Friday 4/25) at $4.647. I think we have a 50-50 chance we will see gas prices drop 8-10% further from these levels over the next month (May).

The analysts are expecting a record amount of gas to be brought out of the ground this year. Second, check out the last two weekly reports – they thought the first was bad and the second was just on projection. You can see though from my notes the amount in storage two weeks ago was 997 bcf below the 5-yr average, and this week’s was 1,008 bcf below the 5-yr average. In my view, we are finally catching up to the 5-year average pace and we should see our storage numbers improve.

Having a trillion cubic feet of gas less than the 5-year average in storage is not good, but if we continue to see improving amounts going into storage this will help lower prices. The key pricing numbers to watch will be:
$4.22 (the April 2nd low…)

I don’t believe we will get any lower in May than $4.22, if we can even get down that low. We will not reach the $3.95 low we saw so far in the year on January 10. We may have to wait until August to challenge that low.

We have a great window now to sell before any summer time spike takes place.

Natural Gas Chart