May Henry Hub contracts dipped below $3/MMBtu today causing some in the trading community to scratch their heads. Given the weakness of oil prices and the expected increase in LNG demand, why are natural gas prices so weak?
As we've noted in previous NGFs, the elevated speculator positioning that accumulated over the winter needed to be liquidated.
Source: MacroMicro
And as you can see in the chart above, we've finally seen net positioning return to normal.
Second, we are in the heart of the shoulder season, and there are no real catalysts to push prices higher in the near term. Lower 48 gas production remains resilient around ~106 Bcf/d, so the market is not convinced that production will decrease from the oil price downturn.
So why did we go long natural gas today?