Dear all, In a classic commodity market low price is strongly correlated with strong contango (c2>>c1). We have currently one of the lowest contango of the last 13 years on NYMEX gaz: Anyone has an explanation ? Best @Maverick74
You need to be careful when using the word "low" with commodity prices. What makes you think natty prices are "low"? I think they are fairly valued at 3.00. The forward curve looks fairly priced. Last year storage was running about 20% to 30% above it's 5 year avg and now we have closed that gap to about 6% above the 5 year avg. We are almost completely re-balanced. I don't see anything on the curve out of whack with the exception of HJ which was very rich for sometime and has since flattened in the last few months.
As I am used to trade Ags commodities, low prices have a meaning for me because production costs are mostly constant. But I think that long term costs have much more volatility in energy (i.e. shale which lower the marginal cost of oil & gas) That would explain why we have lower prices (but not price below production cost) & contango low compared to historical contango Thanks
I understand what you are saying but prices are not low. Almost every forecast I have seen for natural gas including the most bullish has the avg forwward 12 month strip between 3.00 and 3.25. We are slightly under that now as storage is still slightly higher then normal. The market for the most part is balanced. And prices reflect that.
Yep that what I meant, gas prices are not low but they are lower than past gas prices (maybe because long term gas production cost decreased)