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Rising Inventory Report: Natural Gas Prices Fall for the Second Day

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Natural gas prices fall again

July natural gas futures contracts fell for the second day by 2.79% on Thursday. Natural gas prices closed at $2.78 per MMBtu (British thermal units in millions) on June 18, 2015. Prices extended the fall due to increasing stockpile data and a normal weather forecast. ETFs—like the United States Natural Gas Fund LP ETF (UNG)—that follow natural gas prices also fell in yesterday’s trade. UNG fell by 2.53% and settled at $13.51 in Thursday’s trade.

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Yesterday, the EIA (U.S. Energy Information Administration) published the weekly gas stockpile report. Government data showed that gas in storage rose by 89 Bcf (billion cubic feet) for the week ending June 12—compared to a rise of 111 Bcf for the week ending June 5. Market surveys showed that the inventories could rise by 94 Bcf for the week ending June 12, 2015. The rising stockpile led to the fall in natural gas prices.

The tropical storm in the Gulf Coast region might bring heavy rain and wind. This will lead to a mild climate across several parts of the US. This will curb the cooling needs due to previously estimated warmer weather. As a result, the demand for natural gas prices might fall and push natural gas lower.

This is the fifth down day for natural gas prices over the last ten days. During the same period, gas prices rose by 1.54% more on the up days than on the average down days. Natural gas performed poorly with respect to other commodities in yesterday’s trade. Prices fell more than 7% YTD (year-to-date)—led by the slowing demand and mild weather forecast.

The long-term downward trend of natural gas prices affects oil and gas exploration and production companies like Cimarex Energy (XEC), Exco Resources (XCO), and WPX Energy (WPX). They account for 3.17% of the Spider Oil and Gas ETF (XOP). These companies also have a natural gas production mix that’s more than 43% of their total production.

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