Natural Gas Falls Thursday Morning
The commodity is oversupplied, causing natural gas prices to drop once more.
As natural gas prices fall by $0.09, the decline looks to be continuing. As far as indicators tell us, the price will continue to fall. The problem comes down to oversupply. There is simply too much natural gas available for the market to be anything but competitive.
That means great value hunting for investors who want the cheapest price. This is certainly the market for them at the moment. How long that will continue is hard to say, but oversupply should keep the prices low and continuing to drop for the foreseeable future.
As we entire the summer months for much of the world, particularly the major natural gas users, the demand will decrease. That means the price will have to drop as well, since the supply probably is not going to drastically decline. The UK may be replenishing its gas reserves for winter right now, as it uses up much of what it has to see the cold season out, but that will not be enough to lift up the market and create a demand that leads to higher prices.
Price and Forecast
The Henry Hub Natural Gas Spot Price has fallen from $1.76 to $1.61 over the course of a day, and it has fallen even further from the 2.42 price point that gas was at a year ago. That is a 33% decrease from last year.
The $2.50 level is probably as good as this price will get until the midpoint of the year. At that point, many more countries will start filling their reserves in preparation for winter.
What is the floor on natural gas? For now, we are looking at $1.50, and we do not expect it to fall any lower than that. The winter was not particularly brutal, which means that it was brutal for natural gas, and the commodity is trading right about at the bottom for now.
It may make sense to invest in natural gas at this point and see the price drastically increase in the fall as demand skyrockets.
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