Is Natural Gas in a Bull Market?
Natural gas prices
In the past five trading sessions, natural gas (UNG) (BOIL) (FCG) May futures rose 5.4% and closed at ~$3.18 per MMBtu (million British thermal units) on March 29, 2017—2.6% higher than the previous session. Natural gas futures rose due to expectations of tightening in the natural gas demand-supply balance in the coming summer. Natural gas traded between $2.98 and $3.18 per MMBtu over the past five trading sessions.
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In the trailing week, the Energy Select Sector SPDR ETF (XLE) rose 1.5% and the S&P 500 Index (SPY) (SPX-INDEX) rose 0.5%. The Dow Jones Industrial Average (DIA) (DJIA-INDEX) didn’t change during this period.
On March 29, natural gas active futures were 23.8% above their 2017 low of $2.56 per MMBtu on February 21, 2017. It was also the lowest closing price for natural gas futures since August 12, 2016. When securities rise more than 20%, they’re technically considered to have entered a bull market. However, rising oil rigs could be a concern for natural gas prices. We’ll discuss this more in Part 2 of this series.
Key moving averages
On March 29, 2017, natural gas futures were trading ~1.2% above their 100-day moving average and 6.5% above their 20-day moving average. Prices moved above the 100-day moving average on March 29, 2017. Natural gas prices breaking above the 100-day moving average could hint at more gains to come.
Notably, natural gas price sentiment impacts ETFs like the ProShares Ultra Oil & Gas (DIG), the PowerShares DWA Energy Momentum ETF (PXI), the Vanguard Energy ETF (VDE), the iShares US Energy (IYE), and the Fidelity MSCI Energy ETF (FENY).
In this series, we’ll analyze how fundamental drivers like the rig count, natural gas inventories, and the US dollar impact natural gas prices. We’ll also discuss what the natural gas futures forward curve might be indicating.
In the next part, we’ll look at how the oil rig count impacts natural gas prices.