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Natural gas prices rally on bullish inventory withrawals

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Natural gas price volatility

This series covers the latest action in natural gas prices. To learn more about the fundamental drivers of natural gas, related companies and sectors, check out our Energy and Power page.

April futures for natural gas prices settled at $2.841 per MMBtu (British thermal units in millions) on March 5, 2015. Natural gas prices tested the highs on February 11 and 18. March 5 was the fifth up day out of the last ten trading sessions. The average up days have been 0.17% lower than the downs on down days over the same period.

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Natural gas rallies

At closing on March 5, gas futures for April delivery finished at the day’s high—up by 2.6%.The total volume for the day was 140,707 contracts. That was an increase of 40,384 contracts over the previous day. Natural gas prices are trading 40% lower than in mid-November 2014, driven by a natural gas glut.

Having said that, the bull isn’t out of fight yet. A bull-bear battle in February 2015 has caused natural gas prices to rise and fall repeatedly. Consensus on strong supply and little in the way of storage decline have had a bearish influence on natural gas prices. But in the bull’s corner, cold weather forecasts have spooked prices upward.

On March 5, 2015, the U.S. Energy Information Administration, or EIA, reported that natural gas in storage declined by 228 Bcf (billion cubic feet) against the estimated drop of 222 Bcf. This bullish withdrawal implies that there’s increased demand for, or weaker supplies of natural gas. As a result, natural gas prices were up by 2.6% at the close of trade.

The next US natural gas report is due out on March 12, 2015.

Higher natural gas prices affect the margins of gas-focused ETFs including the VelocityShares 3X Long Natural Gas ETN (UGAZ) and the United States Natural Gas Fund LP (UNG). Prices also impact the profitability of gas producers such as EOG Resources (EOG), Southwestern Energy (SWN), and Occidental Petroleum (OXY).

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