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What Can Investors Expect from the Natural Gas Market in 2017?

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What Can Investors Expect from the Natural Gas Market in 2017? PART 1 OF 8

US Natural Gas Prices Were Mixed in 2016: What’s Next?

Natural gas prices in 2016 

US natural gas prices were on a rollercoaster ride in 2016. February 2017 natural gas (FCG) (BOIL) (UGAZ) (GASL) futures contracts fell 2.1% and closed at $3.72 per MMBtu (million British thermal units) on December 30, 2016. However, it rose 59% in 2016 compared to 2015. It’s the largest annual gain for natural gas since 2005. Natural gas was the second best performer across commodities in 2016. Zinc was the top performer—it rose ~60% in 2016—compared to the previous year.

US Natural Gas Prices Were Mixed in 2016: What’s Next?

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US natural gas highs in 2016 

US natural gas active futures hit $3.99 per MMBtu on December 28, 2016. It was the highest level since December 2014. Prices rose due to the following:

As of December 30, 2016, prices were 6.8% below their 2016 highs. In the last six months, they rose ~40.0% due to the hot summer, short covering, and traders watching for possible impacts from La Niña. 

US natural gas lows in 2016  

Natural gas (DGAZ) (UGAZ) (GASL) prices hit a 17-year low of $1.64 on March 3, 2016, due to mild weather, weak demand, strong supplies, and high inventories.

For more bearish drivers in 2017, read How Could Donald Trump Impact the US Energy Market? and Winners and Losers in Energy after the US Election Results.

As of December 30, 2016, prices rose 127.0% from their lows in 2016. Higher natural gas prices usually have a positive impact on natural gas producers’ earnings such as Cabot Oil & Gas (COG), Southwestern Energy (SWN), Newfield Exploration (NFX), and Gulfport Energy (GPOR).

Moves in crude oil and natural gas prices can also impact funds such as the United States Natural Gas ETF (UNG), the VelocityShares 3x Inverse Natural Gas ETN (DGAZ), and the First Trust ISE-Revere Natural Gas ETF (FCG).

What’s in this series?

If you’re a natural gas trader, this series will help you understand the key factors that are impacting natural gas prices in the short term and long term.

The indicators discussed in this series are helpful for investors who want to determine whether or not the industry’s fundamental outlook is favorable. By the end of the series, investors will be able to use the indicators to gauge natural gas price movements in the short term and long term.

Let’s start by looking at the weather update and how it impacts natural gas prices.

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