Insight: Extreme volatility returns to NYMEX natural gas futures

With volatility making a return to the previously calm US natural gas futures market, it’s important to remember that price swings happen in both directions, as individual fundamentals wax and wane in terms of their influence. November saw notable price volatility in the December Henry Hub prompt-month contract. The December contract settled and expired at $4.715/MMBtu, up $1.53/MMBtu from the November NYMEX settle. The onset of a cold November with the looming potential for a cold winter, combined with natural gas storage concerns, created a volatile whipsaw of price movements and resulted in the highest settlement for the NYMEX prompt-month contract since 2014. November’s bullish market developed in spite of rising domestic production, with the Energy Information Agency estimating dry gas output will average 83.2 Bcf/d in 2018, up 8.5 Bcf/d from the previous year. It is precisely this abundance of supply that appears to have encouraged gas utilities to rely more heavily on volumes sourced directly from pipelines, rather than injecting into and then later pulling from gas storage. US temperatures in November were the coldest for the month going back to 2014, averaging 46.2 degrees Fahrenheit. This in itself was enough to spook gas markets. Additionally, the US… continue reading

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Source: CTRM Center

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