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Natural Gas: Up for the Second Day on Cold Weather Forecasts

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Natural gas price action

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 rose for the second day by 1.20% and settled at $2.60 per MMBtu (British thermal units in millions) on April 22, 2015. Gas prices rose on the expectation of increased natural gas demand due to the cold weather forecast. The United States Natural Gas Fund LP ETF (UNG) follows natural gas. It also gained by 0.93% and settled at $13.93 at the close of trade.

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Weather forecasting agencies like AccuWeather and MDA Weather Services expect cold weather across the US. The weather will be below normal temperatures in the eastern and central parts of the US. The cold weather might increase the demand for natural gas in the short term—this supports natural gas prices. As a result, gas prices increased yesterday.

The EIA (U.S. Energy Information Administration) will release the weekly natural gas report today. Bloomberg surveys show that weekly gas in storage might increase by 87 Bcf (billion cubic feet). Last week, government data showed that weekly inventory increased by 63 Bcf.

Prices increased for the fifth time over the last ten trading sessions. During the same period, prices fell more—by 0.05%—on average down days than on the average up days. Gasoline May futures performed the best in yesterday’s trade. Natural gas fared well across all of the commodities. Gas prices declined more than 10% YTD (year-to-date) due to massive production and slowing demand.

Energy ETFs like the Energy Select Sector SPDR ETF (XLE) and the Spider Oil and Gas ETF (XOP) followed the price trajectory of natural gas in yesterday’s trade. They gained marginally by 0.66% and 0.02% at the close of trade on April 22.

Exploration and production companies like Comstock Resources (CRK), Rex Energy (REXX), and EXCO Resources (XCO) have a natural gas production mix that’s greater than 60% of their production portfolio. They account for 3.02% of XOP. These stocks are more sensitive to natural gas prices.

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