Thursday, October 22, 2009

Spot Jumps over Futures

The Henry Hub spot price of natural gas jumped another 20 cents, or 4.2%, to $4.99/MMBtu. What's interesting is that it is now two cents higher than the front month futures price. It's amazing to see the quick recovery in the spot price from lows earlier this month.

Will it hold? If history is a guide, the spot price should move closer to, but stay just below, the front month futures price. The December 2009 contract is now trading at $5.64 and the move to the next contract will take place towards the end of next week. Stay tuned.

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