We looked at natural gas prices during mid-March compared to prices during the pandemic. The graph below plots forward natural gas prices at two points in time. The grey line represents the forward curve as of January 29, 2021 and the blue line as of March 18, 2022.
It is important to note that in the Mid Atlantic, natural gas prices and electricity prices, over time, are strongly correlated.
At that time, we noted the following:
- Over the 14 months since pandemic market lows, natural gas prices had risen significantly.
- While the entire forward curve had moved up, near month prices rose more, causing the curve to become backwardated, meaning the months close in time were priced above months further into the future.
So, how has the market changed in the 50 days (1.7 months) between March, 18 2022 to May, 7 2022? In a few words, it has become intensely volatile. The graph below shows the two curves from above along with natural gas prices as of May 7 (red line).
It took 14 months for forward natural gas prices to rise from the grey curve to the blue curve. It took just 50 days (1.7 months) for prices to rise to the recent curve in red. Stated another way, it took 14 months for the May 2022 contract to rise $2.47/mmBtu. Over the following 50 days, it rose another $3.84. This is highlighted below.
While the entire forward curve has continued to move up, near month prices have risen even more dramatically, causing the curve to become intensely backwardated.
The following graph shows a longer-term historical perspective on forward prices for natural gas. Concerning the two curves furthest to the right on the graph, the purple line represents the futures curve as of June 25, 2020 and the red line as of May 7, 2022.
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