Natural Gas

Prices are finally falling.

Yesterday (+Thursday) the current natural gas contract (June) closed at its lowest price since +April 3rd after storage levels increased more than the analysts expected for the third straight week. This finally started to ease concerns about a potential natural gas shortage next winter.

On +Tuesday of this week (+May 6th) gas contracts traded right around the magic $4.80 mark, finally closing at $4.799. That was significant because prices could not break through to the upside. Once the storage numbers came out traders sold, and sold big. June contract prices dropped nearly 17 cents for the day on +Thursday, closing at $4.572. And we are down about four cents already this morning (+Friday).

The weekly storage data is once again playing a critical role in the gas market because stockpiles got so low this winter with the horrible weather up north and the growing demand for natural gas. Producers, as I have mentioned, need to exceed the five year average each week by 20-35 bcf for the next six months to give us a normal amount of gas in storage for the winter.

Last week the gas storage numbers were 24 bcf above the 5-year average. The latest addition didn’t meet these thresholds, beating the five-year average by just 2 bcf. But additions to storage in early April were so low that natural gas traders now have lower expectations. Simply meeting the 5-year average is enough to reign in prices now.

There are pipelines showing daily increases in the gas coming through and into Midwestern storage facilities. This, coupled with the EIA storage numbers, are giving some faith that surplus production is rising fast enough to bring down prices.

Lower natural gas prices means lower electricity rates.

Click here to view a chart detailing the prices.