10,000 Maniacs Were Right

The dramatic decline of natural gas prices was the focus of our last article (These Are Days to Remember).  As we noted then, in real dollars, natural gas prices were near all-time lows.  Since then, natural gas prices have continued to fall.

Yesterday the November futures contract settled at $2.033 per mmBtu.  The last time the November contract was this low was 17 years ago in 1998, when it closed at $1.97 per mmBtu.

The “winter strip” is the simple average of natural gas futures prices for the five month period of November, December, January, February, and March.  These five months represent the winter heating season, when demand for natural gas is historically the greatest and natural gas prices, correspondingly, are generally highest.

With the rolling off of the November contract yesterday, the 2015/2016 winter strip closed out at $2.349 per mmBtu.

The graph below puts this into perspective by comparing the current winter strip (in red) to that of previous winters.

Incredible.  These are days to remember.

Evelyn Teel contributed to this article.

The Avalon Advantage – Visit our website at www.AvalonEnergy.US, call us at 888-484-8096, or email us at jmcdonnell@avalonenergy.us.  Please feel free to share this article.  If you do, please email or post the web link.  Unauthorized copying, retransmission, or republication is prohibited.  Copyright 2015 by Avalon Energy® Services LLC

1 Comment

  1. Phil OBrien on October 30, 2015 at 1:21 pm

    Hello James,
    Good stuff. I looked up /NG futures see correlation of price action between futures and mmbtu price. The /NG OCT 15 expired 10/26 at 2.106 after hitting a new low at 1.948. That seems to have pulled the mmbtu price way below its $2.20 support line. Next day /NG NOV 15 opened at 2.369 to begin a new monthly downtrend. Shorting the futures looks like a winning trade. I am papertrading the NOV option and if you guys have a mild winter this could be a little winter cash stream, starting DEC 15 option. Best regards from AZ and I will keep you posted. Adios.