Natural gas prices and the gas storage report: Public news and volatility in energy futures markets

✍ Scribed by Scott C. Linn; Zhen Zhu

• Publisher: John Wiley and Sons
• Year: 2004
• Tongue: English
• Weight: 259 KB
• Volume: 24
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.10115

✦ Synopsis

Abstract

This study examines the short‐term volatility of natural gas prices through an examination of the
intraday prices of the nearby natural gas futures contract traded on the New York Mercantile Exchange. The
influence on volatility of what many regard as a key element of the information set influencing the natural gas
market is investigated. Specifically, we examine the impact on natural gas futures price volatility of the
Weekly American Gas Storage Survey report compiled and issued by the American Gas Association during the period
January 1, 1999 through May 3, 2002 and the subsequent weekly report compiled and issued by the U.S. Energy
Information Administration after May 6, 2002. We find that the weekly gas storage report announcement was
responsible for considerable volatility at the time of its release and that volatility up to 30 minutes
following the announcement was also higher than normal. Aside from these results, we document pronounced price
volatility in this market both at the beginning of the day and at the end of the day and offer explanations for
such behavior. Our results are robust to the manner in which the mean percentage change in the futures price is
estimated and to correlation of these changes both within the day and across days. © 2004 Wiley
Periodicals, Inc. Jrl Fut Mark 24:283–313, 2004