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Cold Weather Estimates Drive Natural Gas Prices Higher

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Natural gas price evolution

Below is our natural gas price fundamental analysis. For an in-depth look at natural gas and related companies, sectors, and drivers, please refer to our Energy and Power page.

NYMEX-traded natural gas for May increased by 1.54% on April 21, 2015. Prices increased due to cold weather estimates. This could increase the demand for natural gas. Gas prices closed at $2.57 per MMBtu (British thermal units in millions) at the close of trade on Tuesday. Natural gas tracking ETFs like the United States Natural Gas Fund LP ETF (UNG) also increased by 1.17% and closed at $12.93 at the end of trade.

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MDA Weather Services, a weather forecasting agency, reported that cold weather is expected for the rest of April 2015. In the US, the weather is expected to be chilly in the Midwest, Northeast, and mid-Atlantic states in April 2015. The cold weather will drive the heating demand and result in a short-term spike in natural gas prices.

Last week, the EIA (U.S. Energy Information Administration) reported that weekly gas in storage rose by 63 Bcf (billion cubic feet). The next gas storage report is due for release tomorrow. Bloomberg estimates show an increase in the weekly inventory of 87 Bcf.

This is the fifth up day in the last ten days. The average down days’ prices fell more, by 0.74%, than on average up days. Nickel was the top performer, followed by natural gas, in yesterday’s trade. Natural gas prices fell more than 11% YTD (year-to-date) due to oversupply concerns and weak demand.

The Energy Select Sector SPDR ETF (XLE) and the Spider Oil and Gas ETF (XOP) diverged from the movement of natural gas prices in yesterday’s trade. They fell by 1%% and 3% at the end of trade Tuesday. Oil and gas producers like Gulfport Energy (GPOR), Rex Energy (REXX), and WPX Energy (WPX) dragged XOP down. They account for 3.31% of XOP. These stocks have a natural gas production mix more than 65% of their total production.

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