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Supply and Demand Could Drive Natural Gas Prices Higher

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Supply and Demand Could Drive Natural Gas Prices Higher PART 1 OF 6

Will US Natural Gas Futures Recover from 6-Month Lows?

Natural gas futures  

US natural gas (BOIL) (GASL) (UNG) futures contracts for September delivery fell 0.35% to $2.8 per MMBtu (million British thermal units) on July 27, 2017.

Prices fell due to the following:

  • technical selling
  • mild weather
  • rise in US natural gas inventories on July 21–28, 2017

Lower natural gas prices have a negative impact on natural gas–weighted stocks like Southwestern Energy (SWN), EQT (EQT), Range Resources (RRC), and Cabot Oil & Gas (COG).

Will US Natural Gas Futures Recover from 6-Month Lows?

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September US natural gas futures have fallen 17.6% in the last three months and 22% YTD (year-to-date). US active natural futures are near six-month lows due to the rise in US natural gas production to a ten-month high. 

Natural gas highs and lows  

US active natural gas futures hit $1.68 per MMBtu on March 4, 2016—the lowest level in more than a decade. On the other hand, prices hit $3.99 per MMBtu on December 28, 2016—the highest level in more than 24 months.

Natural gas price drivers next week  

Natural gas traders should track these events in order to gauge natural gas price movement next week:

  • Mild weather is expected in most of the US next week. Mild weather would weigh on natural gas prices.
  • US natural gas inventories are expected to slow down on July 28–August 4, 2017, which would support natural gas prices.
  • Bullish momentum in the S&P 500 Index (SPY) (SPX-INDEX) could support oil and gas demand and energy prices.
  • A rise in US natural gas exports could help natural gas prices.

September natural gas futures are below major moving averages as of August 4, 2017. It suggests that natural gas prices could trade lower. Lower natural gas prices have a negative impact on gas producers like Range Resources and Cabot Oil & Gas.

In the next part of this series, we’ll analyze US weather.

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