Weather is a major catalyst
The weather is the major price driver. Investors can get an idea of how prices will likely move in the short term. The prices drive short-term movements in natural gas producers’ stock prices—like EQT Corp. (EQT), EOG Resources (EOG), Ultra Petroleum (UPL), and Chesapeake Energy (CHK).
Also, since many of these companies are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), these trends also affect XOP. Let’s see how weather impacted prices last week.
Natural gas price movement
After falling into a bear market last week, natural gas prices continued to fall on December 22. This is because weather forecasts are still mild. Also, production has been surging. Read Part 4 in this series to learn more.
Commodity Weather Group forecasted above normal temperatures in most of the lower 48 states through December 26. It forecasted above normal temperatures for the East Coast through December 31.
On Monday, prices fell to a two-year low of $3.144 per MMBtu (British thermal units in millions).
Prices rebounded slightly on Tuesday after MDA Weather Services forecasted colder weather in the Midwest and parts of the Northeast for December 28–January 1.
Prices increased to $3.17 on Tuesday.
The increase was short lived. Prices fell again on Wednesday because the EIA’s (US Energy Information Administration) natural gas inventory report showed that inventories fell less than forecasted. Read Part 2 in this series to learn more about the latest inventory movement.
Prices fell to the lowest level since September 2012. Prices fell to 4.5%. They touched $3.03 on Wednesday.
The week finished off with another decline of 0.8%. Rising production and a milder weather in December continued to overwhelm natural gas prices. Prices fell below $3 for the first time since 2012. Prices rebounded and closed at $3.007 on Friday. This was the fifth weekly decline.
In the next part of this series, we’ll discuss the major natural gas drivers this year.