Why Did Natural Gas Prices Fall Last Week?



Natural gas costs

Natural gas is key to nitrogen fertilizers. It can account for as much as two-thirds of the total production costs for natural gas–based nitrogen fertilizer producers such as CF Industries (CF), Terra Nitrogen (TNH), PotashCorp (POT), and Agrium (AGU).

In this part of the series, we’ll look at the weekly price movements for natural gas at Henry Hub in the US (SOIL). In the United Kingdom, the NBP (National Balancing Point) is where heavy natural gas trading takes place—similar to Henry Hub.

Natural gas prices

Based on the latest data provided by the EIA (U.S. Energy Information Administration) last week, average weekly natural gas prices at Henry Hub fell 2% to $3.25 per MMBtu (million British thermal units)—compared to $3.31 per MMBtu the previous week. However, the front-month (expiring in February 2017) futures rose 6% to $3.4 per MMBtu last week from $3.2 per MMBtu the previous week.

Last week, front-month futures in the United Kingdom NBP fell as much as 7% week-over-week.

EIA’s forecast

In its latest January Short-Term Energy Outlook report, the EIA estimated an average price of $3.55 per MMBtu in 2017 at Henry Hub. For 2018, it expects the price to average $3.73 per MMBtu. In 2016, natural gas prices averaged $2.51 per MMBtu. In 2015, the average price was $2.63 per MMBtu.

In the next few parts of this series, we’ll look at the prices of phosphate fertilizers including diammonium phosphate and monoammonium phosphate.

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