 Quote:
Originally Posted by ziggy29
There are only two possibilities here: either they think prices will fall or else they are able to lock in their costs on the futures market which makes offering a fixed 15-cent rate at least as profitable as offering it at spot plus markup.
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It's a total crapshoot. First question is "How many hurricanes will enter the gulf of mexico?" Second question is "How cold will the next winter be?" Third question is "How soon will Japan get their nuke generator back online?"
The rise in NatGas costs the last two months are in anticipation of a hurricane or two or three...causing supply problems in the gulf.
The other driver is the increased costs of LNG. This increase has been driven by the meltdown of the Nuke generation facility in Japan last year, and Japans willingness to pay top dollar for LNG. As a result, LNG tankers have been re-routed to Japan, which has driven up the price for domestic gas stateside.
"IF" Japan gets their nuke plant up within the next year, and "IF" hurricane impact is minimal, then NatGas should drop back to $7 to $8.
Having said all that, and with the relatively low cost of breaking the contract, I'm not sure that a lock in is a bad idea.
Keep us posted on how it works out for you.
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