Since the Deepwater Horizon rig leased by BP caught fire and sank on April 20, natural gas prices have gone up, and gone down and now seem headed north again.
“There were big shorts in the market” and “traders added to their positions last week,” and now, "traders have been talking to me about the oil spill pushing prices higher,” says Addison Armstrong, director of research at Tradition Energy.
“I think there is some of that notion creeping into the market,” Armstrong says.
Christopher Jarvis, Caprock Risk Management president agrees. “With about 15-20 percent of our natural gas production originating out of the gulf, the spill and fallout from it should really crimp new drilling projects," says Jarvis.
"As a result, we believe natural gas prices will rise as existing and new supplies from the gulf slow at a rapid rate, leaving onshore projects to pick up the slack," he says.
Which is not to say there is a meaningful or immediate crimp in supply; but when you add in warm weather and hurricanes, it could change the short-term pricing outlook.
At this time of year, “I have never seen a report that doesn’t forecast an active hurricane season”, says oil and natural gas analyst Nick Pope, Dahlman Rose & Co. Would he go short here? In a word, “No.”