Price Gap Narrows for Rockies Natural Gas

Downward pressure on the distribution of buy-recommended Hugoton Royalty Trust (HGT) may be lifting as winter natural gas demand and imminent new pipeline capacity bring back the Rockies spot price. Almost a third of HGT’s production is in Wyoming where natural gas price apparently dipped as low as $0.12 a million btu one day in September.

HGT stock seems to have underperformed at the same time and hopefully now can do better. Separately, another regional energy quote, the price for Canadian Syncrude produced by buy-recommended Canadian Oil Sands Trust (COSWF.PK) among others, widened to a premium of $6 a barrel.

Unfortunately, the apparent cause of the price move is two fires, one at Shell’s upgrader in Edmonton a few weeks ago and the other at Syncrude in Fort McMurray a few days ago. Regional price distortions can be surprising, but usually normalize eventually.

Originally published on December 7, 2007.