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Permalink Reply by Les Bamburg on November 19, 2010 at 4:37

Jack, you will want to focus on the final expiration price of the December NYMEX contract in Bid Week since that is the value which impacts producers' (and mineral owners') gas price. Yesterday's NYMEX settlement price ($4.007) indicates a trend but does not have a direct bearing on producer prices.

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Permalink Reply by MARG on November 19, 2010 at 5:38

In my career, I have always told the younger ones: "GOOD THINGS COME TO THOSE WHO WAIT"!
Maybe it will happen!!!! My day you'll make!! Thank you, Jack Blake!!!

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Permalink Reply by Henry on November 19, 2010 at 8:52

Les,
Can you offer a brief lesson to those of us who admit to not really understanding how gas prices work? Can you explain what these monthly prices reflect (are they sale prices for gas now, or in the future?), what price someone's gas actually sells for when it is sold from the well, and what the daily price actually means, if the end of the month price is what matters? And what is Bid Week? Thanks, in advance.

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Permalink Reply by Les Bamburg on November 19, 2010 at 10:10

Henry,

Financial Trading - References to NYMEX mean the NYMEX Henry Hub Natural Gas Futures Contract. Generally when you see people discussing prices (like Jack's above) it is referring to the front month contract or in this case the December contract. So the price is for December baseload gas - not currently produced gas. The NYMEX contract trades daily but expires three business days before the contract month. The November contract expired on October 27th. The NYMEX contract is used for either hedging or pure speculation and is settled financially rather than with physical gas.

Physical Trading - Most of producers' natural gas is sold as baseload gas during bidweek for delivery in the following month. Bidweek is the last five business days of the month proceeding the gas sales delivery month. So bidweek for November delivered gas was Oct 25th thru 29th. Natural gas sold during bidweek can be priced in several different ways but the majority of natural gas produced in NWLa would be priced at some basis to the NYMEX contract for the delivery month. So I could agree to sell 50,000 MMBtu/D to Company A into Texas Gas P/L for December delivery at a price of NYMEX less 8 cents per MMBtu. If the December NYMEX contract expires at $4.10 I will be paid a price of $4.02. Since the NYMEX contract expires in the middle of bidweek, any basis deals are completed during the 1st three days of bidweek.

So you can see how the NYMEX expiration price can directly effect the producer and mineral owner wellhead price. So you can track the December NYMEX price for directional movements but it is only the final expiration price on Nov 26th that has real meaning.

Some producer gas is also sold on a daily cash basis but this should be a small percentage of their total produced volume.

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Permalink Reply by Bill R on November 19, 2010 at 6:00

La Nina Oregon - looking at possibly a white Thanksgiving... rarer than Hen's teeth... be nice (and bad) if it would hang around for about six months or so... cool things down and increase the consumption on the NG reserves... maybe it would make them pop some more holes!

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Permalink Reply by kittycatmama on December 9, 2010 at 2:54

I think I read in the past that the western seaboard of US gets its natural gas from Russia. Did I dream that or is it true. If true, then consumption there would not affect US natural gas prices, right?

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Permalink Reply by Les Bamburg on December 9, 2010 at 3:45

KCM, I think you may have mis-read something in the past. The West Coast of the US is primarily supplied by natural gas from the San Juan Basin, Rockies and pipeline imports from Western Canada plus some California in-state gas production.

Baja California (Mexico) receives imported natural gas from the US plus LNG imports from Indonesia. There could be some LNG imports to Baja in the future from Sakhalin in Russia but no deliveries have yet occurred.

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Permalink Reply by The_Baron on December 9, 2010 at 4:23

It will be interesting to see how Pemex's shut-in gas fields effects supply on the west coast.

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Permalink Reply by Les Bamburg on December 10, 2010 at 5:12

Baron, Mexico does not export natural gas to the US so any shut-in would not effect the West Coast.

 

I assume you are referring to cutbacks in Mexico's oil fields and any related reduction in associated natural gas production. 

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Permalink Reply by The_Baron on December 10, 2010 at 5:45

sure they do, its on the EIA reports.

 

I am refering to the fields they shut in due to drug violence.

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Permalink Reply by kittycatmama on December 10, 2010 at 3:45

http://www.digitaljournal.com/article/270817

This is the article I was thinking about. I ran across it about a yr. ago and thought how crazy for us to import gas when we have so much of it in our country. had to google it to find the article

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Permalink Reply by Les Bamburg on December 10, 2010 at 5:07

KCM, that was the story I thought you may have remembered.  The news rarely does a good job of explaining such arrangements.  Basically has obtained the ability to deliver LNG cargos to a terminal in Baja California but has not delivered a single cargo to date.  Any delivery would be very small in comparison to the average natural gas consumption in California which is ~ 6 billion cubic feet per day (Bcfd).   

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