Energy prices were weak on Monday - Natural gas futures dropped like a rock after last week’s (freeze off) rumor buying segued into fact selling. Meanwhile crude oil and the products hit higher highs but closed lower on mostly sideways trading. We expect more of the same until tomorrow’s DOE release.
This winter’s frigid temps in the U.S. have pushed up heating Btus on the NYMEX… rightly so, after all, high seasonal demand should equal high prices. Consider the forward curve for the NYMEX heating oil contract through the winter and you notice not just an absolute increase in prices, but a relative gain in the front month spread.
In a well supplied consumption commodity market, such as the market in the U.S. for distillate fuels, we expect prices out in the future to be higher due to storage costs and market uncertainty. In the short term, front month prices rise if there are concerns supply will not meet high seasonal demand.