This is What Bear Markets Do, Schork Tells Rigzone

This is What Bear Markets Do, Schork Tells Rigzone
Rigzone talks to Stephen Schork, the Principal and Editor of the Schork Group, and Jim Krane, a Research Fellow at Rice University's Baker Institute, about the U.S. natural gas price.
Image by 24K-Production via iStock

Natty is falling because this is what bear markets do.

That’s what Stephen Schork, the Principal and Editor of the Schork Group, told Rigzone late Wednesday when asked why the U.S. natural gas price was dropping that day. 

“The backwardation on the end of winter NYMEX Mar25/Apr25 spread averaged a $0.122 per million British thermal units (MMBtu) last week, less than half of where it traded in June,” Schork said.

“This week, the backwardation is averaging a season to date low of $0.090 per MMBtu. This is the market’s way of telling us that winter is over before it starts,” he added.

When Rigzone asked the same question on Wednesday to Jim Krane, a Research Fellow at Rice University’s Baker Institute, Krane told Rigzone late yesterday that “it’s weather related”.

“It’s cool in the South, so less need for air conditioning. And up north, it’s warming up, so less need for heat as the unofficial ‘heating season’ begins,” he added.

“Mild weather - in winter and summer - dampens U.S. gas demand,” he went on to state.

A report sent to Rigzone late Tuesday by Standard Chartered Bank Head of Commodities Research Paul Horsnell showed that the company is forecasting that the NYMEX basis Henry Hub U.S. natural gas nearby future price will average $2.70 per MMBtu in the fourth quarter of this year.

The price will average $3.20 per MMBtu in the first quarter of 2025, $3.50 per MMBtu across the second and third quarters, and $2.80 per MMBtu in the fourth quarter of next year, the report projected.

In its latest short term energy outlook (STEO), which was released earlier this month, the U.S. Energy Information Administration (EIA) forecast that the Henry Hub spot price will average $2.81 per MMBtu in the fourth quarter of 2024, $3.16 per MMBtu in the first quarter of 2025, $2.59 per MMBtu in the second quarter of 2025, $3.13 per MMBtu in the third quarter, $3.35 per MMBtu in the fourth quarter, $2.28 per MMBtu overall in 2024, and $3.06 per MMBtu overall in 2025.

In its previous STEO, which was released in September, the EIA projected that the Henry Hub spot price would average $2.52 per MMBtu in the fourth quarter of this year, $3.01 per MMBtu in the first quarter of next year, $2.90 per MMBtu in the second quarter of 2025, $3.28 per MMBtu in the third quarter, $3.36 per MMBtu in the fourth quarter of next year, $2.19 per MMBtu overall this year, and $3.14 per MMBtu overall next year.

The EIA’s latest weekly natural gas storage report, which was released on October 10 and included data for the week ending October 4, stated that working gas in storage was 3,629 billion cubic feet as of Friday, October 4, 2024, according to EIA estimates.

“This represents a net increase of 82 billion cubic feet from the previous week. Stocks were 124 billion cubic feet higher than last year at this time and 176 billion cubic feet above the five-year average of 3,453 billion cubic feet,” it added.

“At 3,629 billion cubic feet, total working gas is within the five-year historical range,” it continued.

The EIA’s next weekly natural gas storage report is scheduled to be released today and will include data for the week ending October 11.

A Rystad Energy gas and LNG market update from Rystad Senior Analyst Masanori Odaka, which was sent to Rigzone by the Rystad team on October 10, noted that “the front-month Henry Hub gas price was 7.8 percent lower week on week at approximately $2.7 per MMBtu on 9 October”.

To contact the author, email andreas.exarheas@rigzone.com


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Andreas Exarheas
Editor | Rigzone