Bulletin - July 2008
NYMEX Natural Gas Historical 12-month strip
(View a larger version of this graph)
What is the 12-month strip?
The NYMEX 12-month strip is an unweighted average of the price of futures contracts for the next
12 months on any given day. In other words, on July 1 of this year (the last data point on the
graph), if you had bought a futures contract for the same amount of gas for the next 12 months,
it would have cost you a little over $13/dekatherm.
How do I compare this to my quote for natural gas?
The per-dekatherm quote you get from Hess for natural gas supply service is the sum of two parts –
the "basis", and the "NYMEX". (In addition to the supply from Hess, you also pay a delivery service
fee to your local utility company for the use of their pipes) The "basis" is the smaller of the two –
it is a bundle of fees including costs of transportation and the supplier's margin. Basis is not
traded on a market. The "NYMEX" quote is a pure pass-through of the cost of gas on the futures market
on that day, but unlike the 12-month strip it is a weighted average, weighted by how much gas you are
expected to use during each month. So if you use more gas in the winter, when gas is more expensive,
your NYMEX quote for the next 12 months will be higher than the 12-month strip. So the 12-month strip is
useful in telling you how your NYMEX quote (for the same period) today compares with what it would have
been on previous days.
