US NATURAL GAS: THE OUTER LIMITS © Leo Haviland October 21, 2013

For the benchmark NYMEX natural gas contract, most traders, “investors”, hedgers, and the media focus closely on the significant price travels and levels of the rolling nearest futures continuation contract, or on the current actual front month contract (such as November 2013). Some marketplace watchers extend their attention to the next several months (as in the winter 2013-14 or summer 2014 gas calendar strips), or perhaps a year out from any given current time. Relatively few clairvoyants outside of a relatively small handful of natural gas and electricity professional insiders intensively examine the price action and levels of forward months over a year out, as in the NYMEX calendar 2015, calendar 2017, and calendar 2020 natural gas strips.

Distant time horizons in financial and commodities marketplaces are not islands apart from the spot (physical) and near term periods. Therefore surveying the price flights, dives, and levels of such “outer limit” time horizons within the NYMEX natural gas marketplace complex provides insight into trading spans (forward marketplaces) close to the current time.

The current sideways trend for NYMEX nearest futures natural gas to some extent encourages a similar pattern in that universe’s distant year periods. The wide-ranging uncertainty relating to NYMEX natural gas’s distant period supply/demand situation- including liquefied natural gas export volumes, the extent of United States economic and electricity demand growth, and issues relating to coal and renewables- to some extent encourages the persistence of a sideways trend for the long run horizon, and thus for NYMEX nearest futures continuation.

What’s the overall current trend for NYMEX distant month natural gas marketplaces such as the NYMEX 2015 and following year calendar strips? On balance, though these assorted calendar strip arenas are at different price levels and do not have exactly the same supply/demand situation, on balance these are in a sideways to down trend, not just a sideways one. Assuming normal weather for upcoming winter 2013-14, although nearest futures continuation will remain trapped in its broad range, nearest futures probably will drift lower from current levels, with a significant chance of challenging its calendar 2013 depths around 305/313. This probably will encourage a renewed test and probable breaking by the calendar strips of 2015 and thereafter of their April (or June, in some cases) 2012 bottoms (which are comparable to those achieved, depending on the calendar strip, in early August 2013 or thereafter). Note that even if America’s LNG exports may be potentially large, any such actual (noteworthy) exports probably will not occur for at least around another couple of years from now.

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US Natural Gas- the Outer Limits (10-21-13)
Natural Gas Chart (Calendar Year 2017 Strip, for essay US Natural Gas- the Outer Limits) (10-21-13)