Talk about getting my attention!

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Because we're exporting it now. It creates more demand.

Low storage and a forecast for cold weather are the primary factors for the uptick.

Surplus does not create demand.

Who said anything about surplus?

As far as I know little if any physical gas is sold on the future price.  They are paper trades.  The monthly settlement price is the best barometer of price but it is a base price meaning a point from which to negotiate so it never seems to match exactly the gross price per mcf on royalty statements.  There could be a discount or a premium paid.  That price is posted the last 2 or 3 days of each month.  The spot price is less important unless you are a buyer/end user and run out of contracted supply and have to complete the month by purchasing additional supply.


You're welcome.  The future price can vary every day during the month depending on trading.  Most royalty owners are looking for the price that most closely corresponds to the price on their royalty statement.  That is the end of the month settlement price.  The majority of physical gas sold on contract for November was set at the end of October.  It will be interesting to see the December price per mcf posted at the end of this month as it is finally winter across most of the continental United States.

You said exporting is creating demand. It’s just a flaw in the logic. Exporting is adding surplus to foreign supplies, causing downward pressure on prices overseas. Domestically,  the exporting of NG would hypothetically cause a drawdown on surplus in the states possibly driving up price. But neither scenario causes demand. 

Demand is creating a market to export. 

So, two things - 

Supply in storage is well below the typical 5 year range as we near the end of "storage season" and transition to withdrawal season.  That, in and off itself, is bullish for prices.  

Then, extended range forecasts show a colder period than was previously forecast.  So demand looks to be robust.

Without LNG shipment to other markets, storage would be between 300 and 600 Bcf more full, so it has been material in dropping supply below typical.  Further, new LNG export capacity was just brought online, so there is some potential for further, export based, LNG demand this winter.  

I'll add a third thing to dbob's two, incremental domestic demand increase.  You don't often hear about this because it is hard to track in real time compared to export by pipeline to Mexico and LNG shipments.  As new gas fired electric generation capacity comes on line replacing coal fired plants demand increases.  Cofiring plants use whichever is cheaper at a point in time.  As natural gas prices remain below $3 it can be cheaper than coal in some region.  Every year there is incremental demand increase.

dbob ,Your last sentence is exactly what I said...

We didn't export before per government policy. Now we do. Open new markets, sell more product. I suppose the demand was always there, we were just cutting ourselves off at the knees by not filling it.



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