LNG macro analysis, page-1587

Prices may have peaked for the heating season, but long-term opportunity stands

Roughly halfway through the winter heating season, the volatility in natural-gas futures that has rattled the market for two months may finally be subsiding.

Futures prices for the commodity fell 36% in December, based on the front-month contracts — the biggest monthly percentage decline since March 2003, according to Dow Jones Market Data. That followed November’s 41% climb, tops for any month since September 2009.

“Relative to the last few years, the price action in natural gas this season has been extremely volatile,” said Tyler Richey, co-editor of the Sevens Report, which provides daily analysis of the financial markets.

Still, “there is never enough production capacity to supply gas to meet peak winter demand,” said James Williams, energy economist at WTRG Economics. “The difference must be met by gas from storage” but now, after a relatively mild December and record-high gas production, the gap is 305 billion cubic feet, less than half the shortfall earlier in the season.

Said Matt Smith, director of commodity research at energy data, analysis and commentary provider ClipperData: “Barring weather surprises, volatility is likely to die down as we shuffle into spring, with prices settling back into their prior range around $3 per million British thermal units". “Prices have almost certainly peaked for the winter heating season.” On Thursday, natural-gas futures settled at $3.099 per million BTUs, down 36% from their 52-week high of $4.837, hit on Nov. 14.

While Richey is cautious about a market that’s as difficult to predict as the weather, he notes that natural gas has “become an integral fuel for industrial, commercial, and government applications ranging from conventional heating to more modern methods of transportation, which means there is definitely an opportunity for investors.”



www.marketwatch.com

Happy Straya Day all



Cheers

Frank