Wednesday, October 21, 2009

HH Spot Price Narrowing Spread With NYMEX

The Henry Hub spot price for natural gas rose another 19 cents, or 4.1%, to $4.79. With a slight drop in the futures price, the spread between the two is starting to narrow.

Normally, the spot price trades fairly close, but a little below, the NYMEX futures price, which represents the "front month" futures price (i.e. today - Oct. 21 - it's the November 2009 contract). I looked at the differential between the two since June 1, 2009. Starting in late August, the spread started to grow. It went crazy in late September with a sharp drop in the spot price and a steep jump in the futures price when the October contract was switched for the much higher priced November contract. But as the table shows below, the spot price is fighting back. The spread is still around 57 cents, but it got as high as $2.39 on October 2.

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