The October 2020 NYMEX natural gas contract settled at $2.101/MMBtu. This brings the average NYMEX monthly natural gas settlement for 2020 up to $1.904/MMBtu. When looking back to 2000, this is the lowest annual NYMEX monthly natural gas settlement average, even though we still have 2 months of settlements that need to be reported for 2020.
What does this mean?
- Consider a NYMEX + product vs. a fixed price product. This would mean that your supply price would float / change with the NYMEX natural market with an adder on top. So, if your risk tolerance is low and your business requires budget certainty than you will want to weigh those risks.
- Be cautious on the length of term that you sign for a NYMEX + supply agreement. Because if natural gas production decreases and we have a cold winter which would mean a spike in demand that could send natural gas prices up significantly.
- You can not forget about early termination fees. If you want to consider ending your supply agreement prior to its expiration date, you will need to pay to exit your supply agreement.
Weather forecasts continue to influence pricing. The weather prediction is showing that the west will be very warm with highs in the 80s and 90s. However, the great lakes region and the east coast will be experiencing a cold sweep with temperatures in the low 30s and 40s. We are already experiencing the cold sweep that will likely increase demand and the LNG feedgas flows.
Natural gas storage is also influencing pricing. Yesterday’s natural gas storage injection reported a build of +76 BCF, which was barely under the expected injection range of +77 to +80 BCF. The expectation for next week’s natural gas storage injection is within the similar range of a +70 to +80 BCF injection.
As of 9:30 a.m. EST today, the November 2020 natural gas contract was trading at $2.414/MMBtu, which is down 0.113 cents from yesterday’s settlement price of $2.527/MMBtu.