Weather Forecasts Could Drive Natural Gas Prices Next Week
Natural gas prices
Natural gas (FCG) (UGAZ) (UNG) futures for May delivery rose 0.7% and were trading at $3.2 per MMBtu (million British thermal units) in electronic trading at 5:10 AM EST as of March 31, 2017. Prices are near a two-month high.
Meanwhile, broader markets like the S&P 500 (SPY) (SPX-INDEX), Dow Jones, and NASDAQ are trading near an all-time high. Bullish momentum in the US stock market could support natural gas demand and gas prices. For more on natural gas prices and drivers, read the previous part of this series.
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The latest forecasting models suggest that cold weather will persist for a few days in the eastern and central parts of the US. The southern parts of the US will experience mild weather. Some forecasting models suggest that mild weather will persist for the rest of the winter. The winter usually lasts until March or April.
Changes in the weather impact the heating demand for natural gas (BOIL) (GASL) and influence prices. The National Oceanographic and Atmospheric Administration estimates that the winter was extremely warm. As a result, the heating demand for natural gas fell ~20% from the average.
About 50% of US households use natural gas for heating. Cold winters drive the demand for natural gas either for furnaces or natural gas–fired electricity generation to power heaters. Changes in demand impact inventories.
In the next part, we’ll take a closer look at US natural gas inventories.