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Natural gas prices rebound to their “pre-injection” levels

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Natural gas price movement

Natural gas prices started the week by falling almost 3% as an arctic blast, which boosted prices last week, gave way to warmer temperatures. Prices closed at $4.15 MMBtu (million British thermal units) on Monday.

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On Tuesday however, prices rebounded for the first time in three days as the Weather Prediction Center called for a powerful snowstorm from Virginia to New York, dropping as much as 8 inches of snow. Also, the government’s midday Global Forecast System forecasted cooler temperatures in the central US next week compared to earlier models.

Prices closed at $4.28 on Tuesday.

Prices continued to accelerate the next day as a result of the bullish inventory report. Read Part 2 of this series to learn more about the EIA’s natural gas inventory report for last week. Prices closed at $4.35 on Wednesday.

In the weeks to follow, as the US accelerates its natural gas withdrawals, it remains to be seen if temperatures would give prices a further boost.

Prices had fallen below $4 for most of the injection season due to record production levels.

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Key stocks and ETFs

Since the weather is the major price driver, investors can get an idea of how prices will likely move in the short term. These prices in turn drive short-term movements in stock prices of natural gas producers like Encana Corp. (ECA), QEP Resources (QEP), Ultra Petroleum (UPL), and WPX Energy (WPX).

Plus, since many of these companies are components of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), these trends also affect the ETF as well.

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