Will Weather Drive Natural Gas Prices This Spring?
Natural gas prices
US natural gas (UGAZ) (UNG) (DGAZ) futures for May delivery rose 0.45% and were trading at $3.17 per MMBtu (million British thermal units) in electronic trading at 5:10 AM EST on April 21, 2017. Prices are near a two-month high. Broader markets such as the S&P 500 (SPY) (SPX-INDEX) and NASDAQ 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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Updated weather models suggest that the northern parts of the US will experience mild weather for the next few days. Cold weather is expected in the southern and eastern parts of the US this week. Overall, the weather is expected to be mild for the rest of April 2017 and early May 2017.
Changes in the weather impact the heating and cooling demand for natural gas (FCG) (GASL) 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 2017 and late June 2017. Changes in demand impact inventories.
In the next part of this series, we’ll take a closer look at US natural gas inventories.