Will Natural Gas’s Fall Continue?
Interested in USO? Don't miss the next report.
Receive e-mail alerts for new research on USO
Between October 4 and October 11, 2017, natural gas futures fell 1.7%. In the trailing week, bearish weather forecast data may have been the reason for natural gas’s fall.
However, US crude oil (USO) (OIIL) November futures rose 2.6% during this period. During the same period, the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.7% and 0.9%, respectively. The divergence in energy prices may have a weak impact on these equity indexes because oil is the primary driver for the energy constituents of these equity indexes on a short-term basis.
On October 11, 2017, the EIA (US Energy Information Administration) released its STEO (Short-Term Energy Outlook) report. Based on the report, the average household expenditure for natural gas for heating purposes in the 2017–18 winter could rise 12%. The rise in the expenditure could be the result of the potential for colder weather than the last year and higher fuel costs. On September 14, 2017, the Climate Prediction Center reported a 55% to 60% chance of La Niña this winter. La Niña could bring severe cold to parts of the US and increase natural gas demand for winter heating purposes.
On October 11, 2017, natural gas active futures traded 2.9%, 1.9%, 3%, and 5.7% below their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. Also, the 50-day moving average was still 3.9% below the 200-day moving average. All these bearish technical indicators could be a concern for natural gas long bets.