Are Natural Gas Prices Set to Rally?
Natural gas futures
On September 20, 2017, natural gas (UNG) (BOIL) October futures fell 0.9% and closed at $3.09 per MMBtu (million British thermal units). However, between September 13 and September 20, 2017, natural gas October futures rose 1.2%. During this period, US crude oil (USO) (DBO) November futures rose 1.9%.
The S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.4% and 1.1%, respectively, during this period. The gains in the energy prices could have benefited the energy constituents of these equity indexes.
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Is winter seasonal demand pushing natural gas prices higher?
On September 14, 2017, the Climate Prediction Center forecast the probability of La Niña effects at ~55–60% in the Northern Hemisphere in the winter of 2017–2018. La Niña could boost natural gas usage because it could bring extreme cold to the US. It could be the reason behind the recent large move in natural gas prices.
On September 20, 2017, natural gas active futures closed 3.4%, 4.7%, and 2.3% above their 20-day, 50-day, and 100-day moving averages, respectively. Also, natural gas prices were just 0.4% below their 200-day moving averages.
However, the 50-day moving average was still 4.9% below the 200-day moving average. It could be a concern for natural gas bulls despite other moving averages being bullish.