Image: Albany NY snow storm 2014Energy commodity prices rose more than other commodity sectors in 2016 @EIAgov
|Natural gas futures lay claim to being the most volatile. This year has seen that volatility drive it from one of the worst performing commodities to 2016’s best performing major commodities. Natural gas is up 60 percent in 2016, the biggest gain among commodities other than zinc. There a few factors that fueled this change in fortune for natural gas.|
- Polar weather headed for the western two-thirds of the US due for the second week of January
- Production in the contiguous U.S. suffering a second-straight annual drop with shale basins slowing
- Optionality, many large players had sold upside calls against production or synthetic positions
- Increasing condensate and LNG exports, on course to be a net exporter for the first time since the 1950s.
Much like oil, natural gas prices were hammered, natty had fallen to the lowest prices since the 1990s.
With the high costs of storage and rolling gas futures contracts from one month to another the bid has been high since the cold shook the northern states and Canada. However we just saw the January contract close higher than February in a large short covering rally. Natural gas futures had rallied over 60 cents in about a week. Obviously that skewed the numbers.
Going forward it has much todo with future weather induced demand and optionality effects. Expect wild moves such as the January expiration to be the norm over the next few months.
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