January 2010 US Natural Gas Update

Natural gas prices continue their recovery. Cold weather has caused high levels of space heating that have resulted in reduced gas storage inventories. Henry Hub spot prices have recovered from their September $2.18 low to an average price of $5.56/MMbtu in the week ending January 22, 2010 (Figure 1). The average daily spot price for 2009 was $3.95/MMbtu. Average wellhead gas prices increased in December 2009 to $4.31/MMbtu from a September low of $2.84 (Figure 2). The average wellhead price for 2009 was $3.61/MMBtu.

Natural gas futures contracts suggest that gas prices will remain in the $5.50-6.00/MMBtu range through Q3 2010, and then increase toward $7.00 in Q4 2010 (Figure 3). The contract for February 2010 delivery closed this week at $5.82/MMBtu.

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