Natural Gas Prices Touched a 4-Month High Last Week

Natural gas prices

Natural gas prices had a good week. Prices mostly increased between May 11 and May 15, closing at $3.016 per MMBtu (million British thermal units) on Friday, May 15. This was 4.7% higher than last Fridays close of $2.88 per MMBtu.

Natural gas prices affect the profitability of natural gas producers like Noble Energy (NBL), Rice Energy (RICE), QEP Resources (QEP), and PDC Energy (PDCE) All these companies are part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), making up ~5.4% of the ETF.

Natural Gas Prices Touched a 4-Month High Last Week

Price movements this week

Prices on Monday, May 11, decreased by 2.7% compared to the prior Friday’s price of $2.88 per MMBtu. They settled at $2.802 per MMBtu on Monday.

On Tuesday, prices increased by ~3.4% to close at $2.897 per MMBtu, an eight-week high, on hotter-than-normal weather forecasts, which boost demand from power plants for cooling needs. MDA Weather Services forecasted above-average temperatures on the East Coast through May 26.

Prices continued to advance the next day on a positive demand outlook. According to the EIA (Energy Information Administration), power plants will burn ~13% more natural gas in 2015 versus 2014. We discuss the EIA’s natural gas consumption forecasts in greater detail in a later part of this series.

On Wednesday, prices rose 1.3% to close at an 11-week high of $2.935 per MMBtu.

Responding to a less-than-expected increase in natural gas inventories in the EIA report, prices soared ~2.5% on Thursday to touch a four-month high of $3.008 per MMBtu. Prices closed above $3 per MMBtu for the first time since January this year.

Prices continued to inch higher the next day. They closed at $3.016 per MMBtu on Friday.

Continue to the following part of this series for an analysis of how various natural gas–exposed securities performed last week.