ANALYST: April 19 Was A Major Turning Point For Natural Gas

natgas prices

Photo: CME

Between summer 2008 and spring 2012, natural gas prices declined approximately 75 per cent hitting industry players extremely hard.But around April 19, prices suddenly jumped higher.

In an email, Morningstar energy equities analyst David McColl told us that the markets are finally responding to the aggressive production cuts energy companies have been trying to make, along with the uptick in demand. 

“It is my opinion that part of reason behind the increase in prices, starting around April 19th, was the recognition of a reversal in the y-o-y trend; storage is increasing at a decreasing rate – a mildly bullish sign in an otherwise bearish environment for gas. This indicates stronger demand, lower production, or a combination of both. While we saw a similar trend in 2009, that was during the recession, the magnitude is more significant now and I believe the trend this time reflects a modest improvement in demand (likely power generation) and lower production.”

But while the bottom may have been reached, he says, more secular trends must come into play to see a true turnaround:

“Unfortunately, in order to have a long-term improvement in gas prices (higher prices), we need the see the net injections come down a prolonged period of robust demand, or a material and ongoing reduction in supply. 

“This is a movement in the right direction, but we need more data before we can say that prices are going higher, or if this was merely a blip on the radar.”

SEE MORE: The events that cause natural gas price shocks.

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