Will the Weather Drive US Natural Gas Futures?
Natural gas futures
NYMEX natural gas (DGAZ)(UGAZ) futures contracts for October delivery fell 0.4% to $3.05 per MMBtu (million British thermal units) in electronic trading at 3:50 AM EST today. Likewise, E-Mini S&P 500 (SPY) December futures contracts fell 0.13% to 2491 in electronic trading at 3:50 AM EST today.
US natural gas prices have gained ~6% since September 8. However, they’re down 14.3% year-to-date. Moves in natural gas prices impact natural gas ETFs and natural gas producers. The YTD (year-to-date) returns for the top five natural gas ETFs, ranked by assets under management, are as follows.
- The VelocityShares 3x Long Natural Gas ETN (UGAZ) is down 71.7% YTD.
- The United States Natural Gas Fund (UNG) is down 27% YTD.
- The VelocityShares 3x Inverse Natural Gas ETN (DGAZ) has risen 47.2% YTD.
- The ULTRA BLOOMBERG NATURAL GAS ETF (BOIL) is down 50% YTD.
- The United States 12 Month Natural Gas Fund (UNL) is down 13.3% YTD.
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Weather forecasting models suggest that the northeastern United States may experience showers and thunderstorms for the next two days. The southwest, plains, and Texas should experience warm temperatures this weekend. The western and northern United States is expected to experience mild temperatures next week. Overall, US weather is expected to be mild next week.
More than half of US households use natural gas for heating and cooling purposes. Mild temperatures and sluggish demand could lead to a fall in natural gas demand. A fall in demand could pressure US natural gas (UNG)(FCG)(GASL) prices. Lower natural gas prices have a negative impact on natural gas producers’ earnings, like Rex Energy (REXX), Exco Resources (XCO), and Antero Resources (AR).
Changes in weather and demand impact US natural gas inventories.