The price of Natural Gas is hovering just below $3, which is about the median price over the past two decades. Or is it? While the spot price has garnered lots of headlines recently for its collapse, the future price has declined much much less so. The quoted price for a year from now is above $5. Clearly the spot price is very depressed relative to the future price. In fact, it is at a record percentage differential. In the chart below (click to enlarge), I have divided the one year forward price by the 1-month forward price. The mean spread has been 6%. You will see I included lines for +/- 2 standard deviations as well. The current relationship is more than 4 standard deviations from the mean. At this point.....Read the entire article
