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Natural Gas Drops ahead of Inventory Data

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Natural gas price declines

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.

Natural gas futures for May delivery dropped by 2.28% on April 8, 2015. Yesterday, gas prices closed at $2.61 per MMBtu (British thermal units in millions). Prices decreased on the consensus that warm weather will drive down the demand for natural gas. NYMEX natural gas tracking ETFs like the United States Natural Gas Fund LP ETF (UNG) also dropped by 1.42% at the close of trade. UNG settled at $13.18 on April 8.

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The EIA (U.S. Energy Information Administration) reports the weekly US natural gas in storage. Last week, the EIA reported that weekly gas in storage dropped by 18 Bcf (billion cubic feet) more than the market’s estimated decline of 10 Bcf. This implies the demand for natural gas. This week’s report is due today. The market consensus is an increase of 11 Bcf.

Price and volatility

NYMEX traded gas May futures dropped for the fifth day over the last ten days. During this period, natural gas prices fell 1.36% more on the average down days than the average up days. Gas price performed was worse than other commodities. Copper was the star performer. It gained almost 1.42% in yesterday’s trade. Natural gas continued its long-term down trend. It fell by 9% YTD (year-to-date).

The Spider Oil and Gas ETF (XOP) is an energy ETF. It was affected more than the Energy Select Sector SPDR ETF (XLE). XOP fell by 2.92%. In contrast, XLE fell by 0.81% in yesterday’s trade. Stocks like Rice Energy (RICE), Exco Resources (XCO), and Rex Energy (REXX) dragged XOP lower. These stocks account for 2.79% of XOP. Their natural gas production mix is greater than 65%. These stocks were down by 4% in yesterday’s trade.

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