Natural Gas Prices To Be Significantly Higher Closer To Winter
From Seeking Alpha
Natural Gas (UNG) prices have fallen from $4.5 (Henry hub spot price) last year to $1.82 in April, and then jumped to above $3 just when everyone thought prices were heading to zero. Volatility brings with itself great trading opportunities, which is why I am going to try and develop a model to estimate what natural gas prices might be during winter this year.
The basic hypothesis is this: The gas prices in the winter months will depend on how hot/cold the winter is, the available inventory of natural gas, and the demand for other uses. Since the demand for other uses is more or less constant on a shorter time frame, this variable can be ignored in this analysis. I am publishing the details of my analysis for curious readers as well as for people to comment and critique on it. Investors who do not want to get into the nitty-gritty of the model can directly scroll down to the conclusion.