40% fluctations in natgas price? That's just insane.
http://stockcharts.com/charts/gallery.html?$natgas
This is simply insane. Prices between 4.57 and 3.22 in the past 45 days? That's 41% variation with no fundamental basis for the change.
No wonder we can't get the investment we need in the natgas industry. Who can survive investing in an industry that fluctuates that much, unless you're a wild gambler?
If you knew how to trade natgas and guess the right way to exploit volatility, wow, what a ride.
The one good thing about this is that extreme volatility is often the sign of a bottom or top in prices.
This is simply insane. Prices between 4.57 and 3.22 in the past 45 days? That's 41% variation with no fundamental basis for the change.
No wonder we can't get the investment we need in the natgas industry. Who can survive investing in an industry that fluctuates that much, unless you're a wild gambler?
If you knew how to trade natgas and guess the right way to exploit volatility, wow, what a ride.
The one good thing about this is that extreme volatility is often the sign of a bottom or top in prices.
Views: 21
Replies to This Discussion
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Permalink Reply by The_Baron on -
prices are based of the perceived availability of gas. We inject at certain times of the year, and draw down at other times. The problem this year is we started injecting more and earlier due to decreased demand.
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Permalink Reply by BirdDawg, plain ole' idiot on
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I really hate to wish any company bad news, But a good hurricane making two circles in the gulf would help prices a lot.
I just don't want it to come on shore. Sorry, but it would help.
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Permalink Reply by Mattie on
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Trade it for over 20 years and see how much grey hair you get! Frankly, I don't see this as extreme volatility, but more of a sign of "finding the bottom", which we might go back to again in late summer/early fall without some bullish news on the weather, economic, or political front. When everyone understands that shale gas will not survive long-term on $4.00 gas, it will be a better day. Unfortunately, the leasehold positions that will be lost if not drilled in the next 12-24 months will keep drilling & volumes up on the shale plays. In addition, the wildcard (LNG) is another hammer waiting to slam the market. Once producers, such as CHK, get past their hedge gains in the next 12-24 months and manage to HBP their core positions, drilling will slow to a halt absent $5.00+ gas prices......just my opinion.
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There is usually a "Fall rally" in the NG trading market every year, but in this weird environment this may be all we get before a fall back again. Regardless of whether the demand is there or not, come winter time, all of the major LDC's will be baseloading storage out (once they reach the magical January 15th timeframe) and it's determined that there is ample storage to meet "peak demand". While regulatory agencies have allowed LDC's to keep some of their gas inventories in storage for late winter demand, generally speaking, there is a mandate to pull it out.........the end result being that, if the marketplace is soft, there will be limited "cash buying" (monthly and daily purchases), and the physical market will be weakened, regardless of what the NYMEX settlements indicate. In trading terms, it's considered a weakening of the prompt months and intramonth cash "basis" market.
I've seen gas trade $5.00 below NYMEX in the daily market when storage gets full (usually late October and early November timeframes). On the flip side of the coin, you will also sometimes see the highest gas prices in late March and early April as a result of aggressive, early withdrawal of storage by LDC's followed by late snowstorms across the nation that require heavy physical daily buying to meet peak demand. If you think the NYMEX is volatile, just try and manage the daily swings in the physical cash markets.
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When I say "highest gas prices of the year", I'm talking $25+/mmbtu.......while the NYMEX continues to trade in the $7.00 - $8.00 range (or less).
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