Why Natural Gas Traders Track US Weather
Natural gas prices
June natural gas (GASL) (BOIL) (FCG) futures contracts rose 0.6% and were trading at $3.26 per MMBtu (million British thermal units) in electronic trade at 3:15 AM EST on April 28, 2017. Prices are trading near a two-month high. Broader markets such as the S&P 500 (SPY) (SPX-INDEX) and Dow Jones are trading near all-time highs. Bullish momentum in the US stock market could support natural gas demand and prices. For more on natural gas prices and drivers, read the previous part of this series.
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The latest weather reports suggest that the southern and eastern parts of the US will experience warm weather during the next week. Cold weather and showers are expected in the central part of the US this week. Overall, the weather is expected to be mild in early May 2017.
Changes in the weather impact the heating and cooling demand for natural gas (UNG) (DGAZ) and influence prices. About 50.0% of US households use natural gas for heating and cooling purposes. Cold winters and warm summers drive the demand for natural gas. Demand for natural gas is usually lower during the spring season between late March and late June. Changes in demand impact inventories.
In the next part of this series, we’ll take a closer look at US natural gas inventories.