Best of the Week
Most Popular
1. Trumponomics Stock Market 2018 - The Manchurian President (1/2) - Nadeem_Walayat
2.Yield Curve Inversion a Remarkably Accurate Warning Indicator For Economic & Market Peril - Dan_Amerman
3.China is Now Officially at War With the US and Japan - Graham_Summers
4.Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18 - Plunger
5.Stock Market Longer-Term Charts Show Incredible Potential - Chris_Vermeulen
6.U.S. Stock Market Cycles Update - Jim_Curry
7.Another Stock Market Drop Next Week? - Brad_Gudgeon
8.The Death of the US Real Estate Dream - Harry_Dent
9.Gold Market Signal vs. Noise - Jordan_Roy_Byrne
10.The Fonzie–Ponzi Theory of Government Debt: An Update - F_F_Wiley
Last 7 days
Moving Averages Help You Define Market Trend – Here’s How - 14th Aug 18
It's Time for A New Economic Strategy in Turkey - 14th Aug 18
Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - 14th Aug 18
Dow Stock Market Trend Forecast 2018 - Video - 13th Aug 18
Stock Market Downtrend to Continue? - 13th Aug 18
More Signs That the Stock Market Will Rally Until 2019 - 13th Aug 18
New Stock Market Correction Underway - 13th Aug 18
Talk Cold Turkey Economic Crisis - 13th Aug 18
Which UK Best Theme Park - Alton Towers vs Thorpe Park vs Lego Land vs Chessington World - 12th Aug 18
USD is Rising. What this Means for Currencies and Stocks - 12th Aug 18
Hardest US Housing Market Places to Live - Look Out Middle Class - 12th Aug 18
America’s Suburbs Are Making a Comeback - 12th Aug 18
Stock Market US Presidential Cycle, Seasonal Analysis and Economy - Video - 12th Aug 18
Yield Curve Inversion and the Stock Market - Video - 11th Aug 18
Land Rover Discovery Sport 1st Dealer Oil Change Service - What to Expect - 11th Aug 18
How to Setup Webinars and Use Them to Overcome the Barriers in E-Learning - 11th Aug 18
Big US Stocks’ Q2’18 Fundamentals - 11th Aug 18
Dow Stock Market Trend Forecast 2018 - 10th Aug 18
SPX Testing Its First Support Level - 10th Aug 18
Dreaming of a "Comfortable Retirement" on a Public Pension? - 10th Aug 18
The Forrest Gump of All Future Democrat Election Losses - 10th Aug 18
More Uncertainty as Stocks Got Closer to January Record High - 10th Aug 18
Gold and Silver Kill Zone - 9th Aug 18
Even More Cracks in the Gold Dam - 9th Aug 18
Ignore the Stock Market “midterm election year”, Which is “supposed” to be Weak - 9th Aug 18
Stock Market Trend and Volatility Analysis - Video - 9th Aug 18
Tips on Maximizing Small Serviced Offices Space - 9th Aug 18
VIX’s Collapse is Bullish for VIX and the Stock Market - 9th Aug 18
Vestles Platform Offers Several Key Trading Tools - 8th Aug 18
US Stock Markets Higher Until November 2018 - Part 2 - 8th Aug 18
US Stock Markets Higher Until November 2018 - Part 1 - 8th Aug 18
Stock Market US Presidential Cycle and Seasonal Analysis - 8th Aug 18
Is the Stock Market Correction Over? - 7th Aug 18
Yield Curve Inversion and the Stock Market - 7th Aug 18
Stock Market Elliott Wave Analysis and Forecast - Video - 7th Aug 18
Trade War! Win the Economic Hostilities Against the Chinese - 7th Aug 18
Technical Analyst Sees Silver as 'Oversold' - 7th Aug 18
Alex Jones Banned! Will Unapproved Opinions Be Censored Off the Internet? - 7th Aug 18
Gold and Silver Stocks On the Verge of the Next Major Decline - 7th Aug 18
First Time Buyers Need to ‘boost the affordability’ of Their Move Alone  - 7th Aug 18
Long Term Care Homes as an Investment are Heating Up! - 7th Aug 18
The Exponential Inflationary Stocks Bull Market - Video - 6th Aug 18
Land Rover Discovery Sport Oil Change Service Dash Warning Message - 6th Aug 18
Restructuring of Western Economic Power - 6th Aug 18
Stock Market Trend and Volatility Analysis - 6th Aug 18
Stock Market and Economy False Narratives That are Just Wrong - 6th Aug 18
VPN – Is It Worth It? - 6th Aug 18
All You Need to Know About Umbrella Companies - 6th Aug 18
Why China Lost the Trade War Before it Even Began - SSEC Stocks Index - Video - 5th Aug 18
Dow Stock Market Elliott Wave Analysis - 5th Aug 18
Iran's Rial Currency Is In A Death Spiral, Again - 5th Aug 18
IMF Produces Another Bogus Venezuela Inflation Forecast - 5th Aug 18
Gold & Silver Precious Metals Monthly Charts - 5th Aug 18
Time to Position for a Decade-Long Bull Market in Natural Resources - 5th Aug 18

Market Oracle FREE Newsletter

Trading Any Market

Natural Gas Got Bomb Cyclone in the New Year

Commodities / Natural Gas Jan 07, 2018 - 02:26 PM GMT

By: EconMatters

Commodities

Natural gas is the dog that got its day in the New Year trading at $175/MMBtu spot in New York. Less than a month ago, Gas Exporting Countries Forum expected lower natural gas prices “over the next two decades” mostly due to a surge in supplies from unconventional sources.

With the sever winter storm hitting much of North America, temperatures have been tumbling since the start of the New Year. Meteorologists dubbed this arctic winter storm "bomb cyclone" because of the extreme drops in pressure over a short period of time. This unusual freezing cold weather has also had a major impact on U.S. commodity markets, natural gas, in particular.



Not Even Texas Can Stay Above Freezing

CNN reported that on New Year's Day, temperatures across 90% of the United States didn't even get up to 32 degrees. In Texas, cities like Dallas have seen lows below freezing during the recent Arctic blast. Weather forecast says by Friday some parts of the U.S. Northeast could “feel as cold as 30 degrees below zero". This frigid cold snap is sending increase in heating demand and an uptick in the price of natural gas.

World’s Most Expensive Natural Gas

Natural Gas Intelligence reported yesterday that natural gas spot price traded as high as $175/MMBtu in New York City where NYMEX futures have been averaging below $3/MMBtu.

Data as of  Jan. 5, 2018 am

This price disparity underscores the inadequate energy infrastructure at the U.S. Northeast region. The current gas transporting capacity is not enough to haul gas from gas producing basins to meet the sudden spike of heating demand in the region. Bloomberg reported that gas in Northeast region is the world’s priciest, commanding 14 times more than U.K. futures price and about nine times more expensive than Asian LNG imports.

Gas Well Freeze-offs

The freezing temperature is also causing headaches for the producers due to gas well freeze-offs. Freeze-off is an industry term describing a phenomenon where gas wells become frozen shut due to a severe drop in temperatures.

Freeze offs s helped limit gas supplies while demand spiked. Genscape reported production freeze-offs in Texas impacting about 1.2 Bcf/d of Permian Basin production month-to-date versus the previous two-week average. Alberta also reported gas well freeze-offs driving AECO, Alberta’s natural gas price benchmark to soar 72% Between Christmas and New Year.

Weather Dependent

The National Weather Service (NWS) predicted the heavy snow will begin to wane by the end of this week. Despite the $175/MMBtu seen in New York, natural gas futures pulled back to today's $2.80 levels due to lower-than-expected inventory draw and long-range warmer weather outlook.

Region Bound

Unlike crude oil which is traded on global markets, natural gas is still quite regional with demand mainly driven by weather.  Many have high hopes for the LNG to propel natural gas into a global commodity.  However, it seems most people were too optimistic that Asian LNG prices remain in the double-digit territory, underestimated the new global LNG capacity coming online, and overestimate the pace and volume of coal-to-gas switch.

A report published by International Gas Union (IGU) cited that some markets that typically rely heavily on spot and short-term LNG volumes experienced a "significant decline" in demand in 2016. For example, the LNG demand drop of Brazil was due to improved hydro-power availability. The same IGU report also noted that Northeast Asian LNG spot price averaged only $5.52/MMBtu in 2016.



A look at FREC latest world LNG landed prices should give a more realistic picture that LNG cargo from the U.S. are not as profitable as people initially thought when most of the world's mega LNG projects got sanctioned.

From that perspective, I agree with the outlook by Gas Exporting Countries Forum that natural gas/LNG prices could be expected to remain lower for longer due to ample supplies, while the price movement would be driven mainly by regional weather or other demand factors.

The author and EconMatters have no position in the aforementioned commodity markets and related stocks. The views and opinions expressed in this article are author's own.  

By EconMatters

http://www.econmatters.com/

The theory of quantum mechanics and Einstein’s theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent. This interconnectness of all things is the essense of the concept “yin-yang”, and Einstein’s fundamental equation: matter equals energy. The same theories may be applied to equities and commodity markets.

All things within the markets and macro-economy undergo constant change and transformation, and everything is interconnected. That’s why here at Economic Forecasts & Opinions, we focus on identifying the fundamental theories of cause and effect in the markets to help you achieve a great continuum of portfolio yin-yang equilibrium.

That's why, with a team of analysts, we at EconMatters focus on identifying the fundamental theories of cause and effect in the financial markets that matters to your portfolio.

© 2018 Copyright EconMatters - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

EconMatters Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules